Annual Report and Audited
Consolidated Financial Statements
For the year ended 31 December 2023
Registered number: 66847
Paving the way
for life-changing
therapies
01  STRATEGIC REPORT
Highlights 01
RTW Biotech Opportunities at a Glance 02
The RTW Difference 04
Investment Objective
and Investment Policy 06
Chair’s Statement 08
Report of the Investment Manager 10
RTW’s Long-Term Strategy 24
Strategy in Action 26
Operational and Financial Review
for the Year 28
Key Performance Indicators 30
Risk Management 32
Principal and Emerging Risks and
Uncertainties 34
Longer Term Viability Statement 37
Engaging with Stakeholders
(Section 172) 38
Responsible Investment 40
02  GOVERNANCE REPORT
Biographies of Directors 42
Report of the Directors 44
Corporate Governance Report 47
Statement of Directors’ Responsibilities 52
Directors’ Remuneration Report 53
Report of the Audit Committee 56
03  CONSOLIDATED FINANCIAL
STATEMENTS
Independent Auditor’s Report 61
Consolidated Statement of Assets and
Liabilities 65
Consolidated Condensed Schedule of
Investments 66
Consolidated Statement of Operations 76
Consolidated Statement of Changes
in Net Assets 77
Consolidated Statement of Cash Flows 79
Notes to the Consolidated Financial
Statements 80
04  ADDITIONAL INFORMATION
General Company Information 99
Glossary 100
Alternative Performance Measures 104
AIFMD Disclosures 105
Schedule of Key Service Providers 106
Defined terms used in the Annual Report are
defined in the Glossary.
Read more online
rtwfunds.com
7
New core portfolio companies added
inthe year³, 10 core portfolio companies
successfully exited
(2022: 3 and 6, respectively)
RTW Biotech Opportunities Ltd
(formerly RTW Venture Fund
Limited) provides shareholders with
a full life cycle approach to biotech
investing. With the Group’s capital
and the Investment Manager’s
expertise, we’re powering
breakthroughs in biotech and
medtech that can transform the
wellbeing of people around the world.
US$399.3M
Ordinary NAV
(2022: US$326.1M)
+82.3%
Ordinary NAV growth since inception
(2022: +47.6%)
+23.5%
Ordinary NAV per share growth YTD
(2022: -10.2%)
US$55.5M
Available Cash
(2022: US$-2.3million
2
)
US$1.90
NAV per Ordinary Share
(2022: US$1.54)
+34.9%
Total shareholder return since admission
(2022: +16.4%)
+16.0%
Total shareholder return YTD
(2022: -32.0%)
US$1.40
Price per Ordinary Share
1
(2022: US$1.21)
31 December 2023 Financial Highlights
1 The share price at 26 March 2024 was US$1.29.
2 Prior periods reported “cash and cash equivalents” (2023: US$2.7 million, 2022: US$7.0 million)
while the current period and going forward will report Available Cash, as defined in the Alternative
Performance Measures.
1 Core portfolio consists of companies that were initially added to the portfolio as private
investments, reflecting the key focus of the Group’s strategy. As initially private investments
continue to be held beyond IPO, the core portfolio consists of both privately-held and
publicly-listed companies.
2 Royalty vehicles were not broken out as a separate category in the prior year; they were
included in core private.
3 Consists of six core privates and 1 royalty vehicle.
4 New statistic reported in the current period.
5 One core company is a specialty clinical laboratory offering testing services, so clinical
programmes are not applicable.
66.7%
Of NAV invested in core
portfolio companies
(2022: 71%)
36
Core portfolio companies in total:
22 private, 2 royalty², 12 public
(2022: 39 total, 25 private, 14 public)
22/36
Core companies have clinical
programmes
5
(2022: 25/39)
8/36
Core companies
have commercial
products
(2022: 6/39)
5/36
Core companies
are pre-clinical
(2022: 7/39)
10
Significant capital markets activities
in the core portfolio¹: 2 take-outs,
4 IPOs, 1 SPAC merger, 1 reverse
merger, and 2 strategic financings
(2022: 2 IPOs, 1 strategic financing)
Portfolio Highlights
01
Strategic Report Governance Report Financial Statements Additional Information
RTW Biotech Opportunities at a Glance
Germany, Spain, Switzerland and
the Nordic countries: Rocket
Pharmaceuticals, NumabNetherlands: Argenx
Israel: UroGen
Pharma
China: JIXING,
Nuance, Oricell
Our global reach
US
EUROPE
CHINA
UK
ISRAEL
RTW Bio’s long-term strategy is anchored in identifying sources
of transformational innovations with significant commercial
potential by engaging in deep scientific research and a rigorous idea
generation process, which is complemented by years of investment,
company building, and both transactional and legal expertise.
RTW Headquarters RTW global offices
UK:
Immunocore,
Artios
Ireland:
Avadel, GH
Research
Transforming the
lives of millions
OUR PURPOSE
02
THE UK & EUROPEAN MARKETS
We have identified and invested in exceptional British
andEuropean scientific assets. We look to contribute
tothese biotech ecosystems by engaging in creation
orongoing development of new companies around
promising early-stage assets by partnering with
universities and in-licensing academic programmes,
and by providing financial and human capital to
entrepreneurs toadvance scientific programmes.
What this means for investors:
• access to cutting edge research labs and academic
knowledge
• access to greater breadth of science and opportunity
• participation in value creation in local biotech
ecosystems
The RTW culture
Members of
the RTW team
70
2022: 76
Collaboration
Leveraging collective genius
Progress
From research, to innovation,
to reality
Humility
The hunger to learn and improve
Tenacity
Finding pathways to success while
overcoming obstacles
Rigour
Poring over the data
Leadership
The courage to shape a better future
Our Long-Term
Strategy,
page 24
Learn more
about us in our
culture video
Our global reach
RTW’s priority is unlocking value
by advancing early-stage scientific
development to deliver innovative
therapies to patients in need.
At the core of our business is a set
of guiding principles.
THE US MARKET
We have a core focus on the US, with deep coverage
of opportunities from academia to mid-size public
companies. We apply a full range of deal execution
andcompany building capabilities.
THE CHINA MARKET
We are capturing commercialisation opportunities in
China by investing across the venture capital life cycle:
from new company formation to IPO, to bringing
successful, innovative drugs to Chinese patients.
What this means for investors:
• access to a budding biotech market, innovation
and expertise
• an opportunity to be established in a market with
the scope for significant growth
Learn more
about this in our
Purpose Video
What we do goes
beyond short term
financial gain
We invest for the long term, powering
the next generation of breakthroughs in
science and medicine to help transform
lives. That’s what drives us – the greater
impact we can help create.
Strategic Report Governance Report Financial Statements Additional Information
03
The RTW Difference
RTW connects data,
experience, and talent
to bring opportunities
into focus
We identify transformative assets with
growth potential across the life sciences
sector. Our approach is driven by deep
scientific expertise with a long-term
investment horizon.
DEEP RESEARCH
We dive into the data to
spotopportunities that
othersmiss.
Opportunities, potential, errors, and
risks are all easily overlooked, so we
analyse and scrutinise, applying a
unique, repeatable research approach,
fine-tuned over years of successful life
sciences investment. We combine the
best data, technology, and scientific
insight to unearth opportunity.
SELECTIVITY
We cast a wide net, but only
assets with high probability
of becoming commercially
viable products and those
with the greatest potential
to revolutionise treatment
outcomes for patients pass
the test.
We choose partners who care less
about quick wins and more about
lasting change.
KNOWLEDGE
We are doctors, academics,
and drug developers; venture
capitalists and investment
bankers; lawyers, data
scientists and company
operators.
We work as a team, applying collective
expertise to spark ideas, solve problems,
avoid pitfalls, and build successful
companies.
RTW’s
competitive
advantages
04
FLEXIBLE SOLUTIONS
Drug development rarely
follows a linear path.
Whatever the twists and turns, we have
the skills in house to solve problems and
accelerate progress, from providing
capital and infrastructure to advance
promising academic programmes, to
forming new companies and taking
those companies public. We carve
new pathways, allowing scientists and
entrepreneurs to bring life-changing
therapies to patients.
LONGTERM PARTNERS
Bringing new therapies to
patients is a long journey
that comes with both thrilling
triumphs and inevitable
setbacks.
We are hands-on and fully invested in
the success of our partners because
their success is our success. We choose
partners who are as passionate about
revolutionising medicine as we are.
PEOPLE
Healthcare innovation is hard
work, and easy wins are few
and far between.
Those who succeed don’t lose sight of
why it matters. These are the people we
love working with. We come from many
different backgrounds but are united in
a mission to improve people’s lives.
Strategic Report Governance Report Financial Statements Additional Information
05
Investment Objective and Investment Policy
Learn more
about us in our
Investment Case
Applying deep scientific
expertise with a long-term
investment horizon
Investment Objective
The Group seeks to achieve positive absolute performance
and superior long-term capital appreciation, with a focus on
forming, building, and supporting world-class life sciences,
biopharmaceutical and medical technology companies. It
intends to create a diversified portfolio of investments across
a range of businesses, each pursuing the development of
superior pharmacological or medical therapeutic assets to
enhance the quality of life and/or extend patient life.
Investment Policy
The Group seeks to achieve its investment objective by
leveraging the Investment Manager’s data-driven proprietary
pipeline of innovative assets to invest in life sciences
companies:
• across various geographies (globally);
• across various therapeutic categories and product types
(including but not limited to genetic medicines, biologics,
traditional modalities such as small molecule
pharmaceuticals and antibodies, and medical devices);
• in both a passive and active capacity and intends, from
time to time, to take a controlling or majority position
with active involvement in a Portfolio Company to assist
and influence its management. In those situations, it is
expected that the Investment Manager’s senior executives
may serve in temporary executive capacities; and
• by participation in opportunities created by the
Investment Manager’s formation of companies de novo
when a significant unmet need has been identified and the
Group is able to build a differentiated, sustainable business
to address said unmet need.
The Group expects to invest approximately 80 per cent
of its gross assets in the biopharmaceutical sector and
approximately 20 per cent of its gross assets in the medical
technology sector.
The Group’s portfolio will reflect its view of the most
compelling opportunities available to the Investment Manager,
with an initial investment in each privately held Portfolio
Company (“Private Portfolio Company”) expected to start in
a low single digit per cent of the Group’s gross assets and
grow over time, as the Group may, if applicable, participate in
follow-on investments and/or continue holding the Portfolio
Company as it becomes publicly-traded. It is intended certain
long-term holds will increase in size and may represent
between five and ten per cent or greater of the Group’s gross
assets.
The Group anticipates deploying one third of its capital
designated for core private investments toward early stage and
de novo company formations (including newly formed entities
around early-stage academic licenses and commercial stage
corporate assets) and two thirds in mid-to-late stage ventures.
The Company may choose to invest in Portfolio
Companies listed on a public stock exchange (“Public
Portfolio Companies”) depending on market conditions and
the availability of appropriate investment opportunities.
Equally, as part of a full-life cycle investment approach, it is
expected that Private Portfolio Companies may later become
Public Portfolio Companies. Monetisation events such as IPOs
and reverse mergers will not necessarily represent exit
opportunities for the Group. Rather, the Group may decide
to retain all or some of its investment in such Portfolio
Companies or the acquiring Company where they meet the
standard of diligence set by the Investment Manager. The
Group is not required to allocate a specific percentage
of its assets to Private Portfolio Companies or Public
Portfolio Companies.
The Group also intends, where appropriate, to invest further
in its Portfolio Companies, supporting existing investments
throughout their lifecycle. The Group may divest its interest
in Portfolio Companies in part or in full when the risk–reward
trade-off is deemed to be less favourable.
From time to time, the Group may seek opportunities
to optimise investing conditions, and to allow for such
circumstances, the Group will have the ability to hedge or
enter into securities or derivative structures in order to
enhance the risk-reward position of the portfolio and its
underlying securities.
Investment restrictions
The Group will be subject to the following restrictions when
making investments in accordance with its investment policy:
• the Group may not make an investment or a series of
investments in a Portfolio Company that result in the
Group’s aggregate investment in such Portfolio Company
exceeding 15 per cent (or, in the case of Rocket
Pharmaceuticals, Inc., 25 per cent) of the Group’s
gross assets at the time of each such investment;
• the Group may not make any direct investment in any
tobacco company and not knowingly make or continue to
hold any Public Portfolio Company investments that would
result in exposure to tobacco companies exceeding one
per cent of the aggregate value of the Public Portfolio
Companies from time to time.
Each of these investment restrictions will be calculated as
at the time of investment. In the event that any of the above
limits are breached at any point after the relevant investment
has been made (for instance, upon successful realisation of
economic and/or scientific milestones or as a result of any
movements in the value of the Group’s gross assets), there
will be no requirement to sell or otherwise dispose of any
investment (in whole or in part).
06
Leverage and borrowing limits
The Group may use conservative leverage in the future in
order to enhance returns and maximise the growth of its
portfolio, as well as for working capital purposes, up to a
maximum of 50 per cent of the Group’s net asset value at the
time of incurrence. Any other decision to incur indebtedness
may be taken by the Investment Manager for reasons and
within such parameters as are approved by the Board. There
are no limitations placed on indebtedness incurred in the
Group’s underlying investments.
Capital deployment
The Group anticipates that it will initially, upon Admission
and upon any subsequent capital raises, invest up to 80%
of available cash in Public Portfolio Companies that have been
diligenced by the Investment Manager and represent holdings
in other portfolios managed by the Investment Manager,
subsequently rebalancing the portfolio between Public
Portfolio Companies and Private Portfolio Companies as
opportunities to invest in the latter become available.
Cash management
The Group’s uninvested capital may be invested in cash
instruments or bank deposits pending investment in Portfolio
Companies or used for working capital purposes.
Hedging
As described above, the Group may seek opportunities
to optimise investing conditions, and to allow for such
circumstances, there will be no limitations placed on the
Group’s ability to hedge or enter into securities or derivative
structures in order to enhance the risk-reward position of the
portfolio and its underlying securities.
On an ongoing basis, the Group does not intend to enter into
any securities or financially engineered products designed to
hedge portfolio exposure or mitigate portfolio risk as a core
part of its investment strategy, but may enter into hedging
transactions to hedge individual positions or reduce volatility
related to specific risks such as fluctuations in foreign
exchange rates, interest rates, and other market forces.
Strategic Report Governance Report Financial Statements Additional Information
07
08
Chair’s Statement
I am pleased to report that the Investment
Manager (“RTW”) has, once again, achieved
an excellent performance. The Group’s NAV
returned +23.5% per Ordinary Share over
the twelve months to 31 December 2023,
materially outperforming both the Russell
2000 Biotechnology Index (RGUSHSBT)
and the Nasdaq Biotech Index (NBI) which
returned +10.6% and +3.7%, respectively.
The Group’s NAV has also outperformed its
biotech benchmarks over three years, much
of which was spent in the second worst bear
market in the sector’s history.
Since admission in October 2019, the Group’s NAV has
significantly outperformed its biotech benchmarks returning
+82.3% versus +4.8% and +29.4% for the Russell 2000
Biotechnology Index and the NBI, respectively. However, the
Group’s share price has lagged NAV growth with a +34.9%
return as the shares fell to a discount to NAV in 2022,
alongside many of our peers, after having traded at a small
premium for most of the prior years since admission. The
discount widened marginally last year, albeit less than its
largest pre-IPO investing peers. This relative narrowing is
likely reflective of the Group’s peer-leading performance over
most time periods and shareholder activity in the year which
has significantly raised the Group’s profile to investors.
2023 Overview and 2024 Outlook
There was an abundance of positive activity in the portfolio
in 2023 despite a more subdued environment (until the
fourth quarter). The Group was able to benefit from RTW’s
preferred position in the eyes of biotech companies and a
strong balance sheet to execute both traditional and creative
deals. The Group made seven new private investments
(versus a total of three in 2022), had two take-outs, four IPOs,
a SPAC merger, a reverse merger, and struck two strategic
financing deals. At the end of the period, the Group had
thirty-six core portfolio holdings, a small decrease from
thirty-nine last year. The core portfolio represents 67%
of NAV, compared with 71% at the same time last year.
The “other public” portfolio (a replica of the long names held
in RTW’s private funds, devised to mitigate the cash drag of
setting aside cash for future deployment into core positions)
was reduced to 20% as available cash was increased in
preparation for the purchase of a stake in Arix Bioscience,
which subsequently occurred soon after year end.
The Prometheus Biosciences sale was the stand-out event
of the year. Prometheus was the Group’s largest holding
when it was acquired by Merck at a 75% premium to the prior
closing price in the first half. Total proceeds from the sale of
Prometheus shares amounted to US$99.1 million on total
invested capital of US$8.4 million, representing an 11.8x
multiple. The multiple on capital invested in the private
rounds was 22x. This transformational transaction is a
perfect example of the Group’s full life cycle investment
strategy at work.
The Group’s unique exposure to companies created by RTW
was significantly additive this year. Rocket’s continued clinical
progression was rewarded in 2023 after a challenging couple
of years for the shares of gene therapy companies. The
company now looks well set to transition to a commercial
stage company in 2024, a significant inflection point. JIXING
experienced two transformational events in the last two
months of the year. Firstly, they completed the first round of
their Series D financing, which was co-led by RTW and Bayer
AG, with whom they also agreed a strategic partnership.
Secondly, JIXING-related company, Cytokinetics, announced
the results of its pivotal Phase 3 clinical trial of Aficamten in
patients with symptomatic obstructive hypertrophic
cardiomyopathy. JIXING has an exclusive license for Aficamten
for development and commercialisation in Greater China. The
data are viewed as better than the incumbent approved drug
owned by Bristol Myers called mavacamten in a drug class
that is expected to generate billions of revenues. JIXING is
expected to communicate with the relevant regulatory
authorities for Aficamten’s new drug application as soon as
possible with approval expected in the first half of 2025.
From a market perspective, the Federal Reserve’s interest
rate pivot and a flurry of takeouts helped the biotech sector
avert what would have been an historic three down years in
a row, with a sharp rally in the last two months of the year.
The sector’s vigorous move off the bottom is indicative of
a re-evaluation after several years of fund flows out of the
sector. With the fundamentals behind M&A remaining
unchanged and a shrinking pool of marquee assets to acquire,
prospects for the sector’s continued recovery look promising.
Financing conditions in the sector may remain tighter than
normal, however, and this environment enables RTW
to flex the transactional capabilities it has built over the years
to help support exciting companies and capture investment
opportunities.
In a time when private market valuations are so heavily
scrutinised, it is important to have a robust valuation process.
We strongly believe this to be the case with RTW’s Valuation
Committee’s fair value approach to marking the private
portfolio on a monthly basis, with regular supporting opinions
from two independent third-party valuation firms. The
validation comes when private investments become public
companies. With four IPOs in 2023, we have a reasonable
sample to assess the private portfolio’s fair value. With an
average step-up from prior private holding value to IPO price
of 46%, we emphasise our confidence in the Group’s portfolio.
The public portfolio is well placed too with the sector’s
positive momentum continuing into 2024. In January and
February alone, there were five IPOs versus twelve for the
whole of last year. The sector indices have started the year
well, the smaller cap Russell 2000 Biotech Index in particular.
To the end of February, it has returned +12.0% vs the Nasdaq
index’s +7.2% and 6.8% for the S&P500. For RTW Bio the
completion of the Arix Bioscience acquisition on the 12th of
February, brings fresh capital and scale at an opportune time.
We reiterate our confidence in the outlook for 2024.
William Simpson
Chair of
the Board
Investing in tomorrow’s most
promising science
Shareholder Activity and
Arix Bioscience Acquisition
Despite these many positives, the Company’s share price
traded at a discount to NAV this year alongside many of our
investment company peers, especially those that provide
growth financing to private companies. In order to help
address this and raise the profile of the Company, we
undertook several significant changes and initiatives
throughout the year. To help generate new demand, we
appointed Numis Securities (now Deutsche Numis) as joint
corporate broker and Cadarn Capital to manage fund
distribution and investor relations, both in April 2023. This
followed the Company’s rebranding and new website launch
in early 2023. In the second half of the year, we changed the
Company’s name from RTW Venture Fund Limited to RTW
Biotech Opportunities Ltd to better reflect the full life cycle
nature of the investment strategy.
We introduced a buyback programme using the proceeds
from the sale of Prometheus Biosciences, believing it to be a
good allocation of capital as the discount to NAV per Ordinary
Share at which the Company’s shares were then trading
materially undervalued the Company and its portfolio.
The most transformational event came in early November
as the Company announced its intention to acquire the assets
of Arix Bioscience via a recommended all-share offer through
a scheme of reconstruction. The scheme was conditional upon
regulatory and Arix shareholder approval, both of which have
since been obtained. We believe that combining the assets of
Arix with the Company’s enhances the Company’s position as
a leading UK-listed life sciences fund by adding significant
scale. Shareholders in the combined entity will be in a
stronger position to benefit from potential future value
creation through NAV growth, improved secondary market
liquidity, and a potential re-rating uplift of the combined
company’s shares. Following this increase in scale, the Board
believes it an appropriate time to recruit an additional
independent director with relevant industry expertise and
is in the process of reviewing potential candidates. Later
in November, the Company hosted its first London Capital
Markets Day which featured presentations from senior RTW
Investments team members, panels of eminent guests from
academia, HM Government and industry, and was a great
success with over one hundred professional investors and
analysts attending , demonstrating, we believe, that the
efforts undertaken so far to raise the Company’s profile are
working, and a solid foundation for a re-rating is in place.
2024 AGM
The Company will hold its Annual General Meeting on 16 May
2024 to review the annual results and provide portfolio
updates. We would like to dedicate a part of the meeting to
address questions from our shareholders. At the present
time, we anticipate holding it at Royal Chambers, St Julian’s
Avenue, St Peter Port, Guernsey. We encourage our
shareholders to share questions at the following email,
and we will endeavour to answer as many as we can:
biotechopportunities@rtwfunds.com.
On behalf of the Board, I would like to express my
gratitudefor your continued support as well as extend a
warm welcome to new shareholders from Arix. Wishing you
allthe best for 2024.
William Simpson
Chair of the Board of Directors
RTW Biotech Opportunities Ltd
27 March 2024
RTW Biotech Opportunities Ltd’s
acquisition of Arix Bioscience plc (“Arix”)
We are delighted to confirm the completion of the all-share
acquisition by RTW Bio of Arix’s assets, post year end on
13February 2024. The transaction was announced on
1November 2023 and was effected through a scheme of
reconstruction and the voluntary winding-up of Arix under
section 110 of the Insolvency Act 1986. We welcome Arix
shareholders to the RTW Bio shareholder register.
The RTW Bio board believes that the combination has
compelling strategic rationale, primarily by adding capital
and scale to our best-in-class platform. This stronger
foundation is expected to generate future growth
opportunities for shareholders. The combination delivered
ameaningful and immediate increase in NAV, making RTW Bio
the second largest full life-cycle biotech investment company
or trust listed on the London Stock Exchange and the fifth
largest listed healthcare company or trust. Arix’s uniquely
complementary portfolio adds diversification benefits, while
the significant proportion of liquid assets provides investment
firepower at a compelling time to be deploying capital into the
life science sector.
The enlarged market capitalisation, which increased from
US$294.9 million as of 31 December 2023 to US$529.9 million
following completion, should improve secondary market
liquidity for trading in RTW Bio shares. RTW Bio may also in
the future qualify for inclusion in the FTSE 250, which could
further improve the secondary market liquidity of its shares.
The increased scale is expected to deliver a more efficient
cost base, benefiting from the infrastructure of RTW and a
simple, single management fee across a larger asset base. In
all, these benefits could lead to a meaningful re-rating uplift
opportunity for RTW Bio in the medium term.
Acquiring Arix’s complementary life science assets is a
step-change accelerator to our vision for RTW Bio to be a
UK-listed fund with meaningful scale that invests in innovative
life science businesses in the UK and globally. We believe that
the scale that this transaction creates should prove
well-timed given the unprecedented life science market
conditions, the accelerating medical innovation, and industry
trends that play into RTW’s core strengths. This transaction
creates value and opportunity for both RTW Bio and Arix
shareholders and positions all shareholders for future upside.
ACQUISITION
Strategic Report Governance Report Financial Statements Additional Information
09
Report of the Investment Manager
Roderick Wong, MD
Managing Partner
10
11
Since its listing on the London Stock
Exchange in October 2019, the Group has
grown the NAV attributable to Ordinary
Shareholders from US$168.0 million to
US$399.3 million as of 31 December 2023.
Disappointingly, the share price has not kept pace with NAV,
returning +34.9% in the same period, as the shares fell to a
discount in early 2022, as did many listed investment trusts
in most sectors, and have remained there since, despite a
strong NAV per Ordinary Share performance. In 2023, the
NAV per Ordinary Share returned +23.5% while the share
price returned +16.0%. With continued NAV outperformance
versus the market and peers, and with the sector’s fortunes
having turned markedly in the fourth quarter of 2023, we
would expect the discount to narrow.
RTW Biotech Opportunities Ltd
Year end reporting
period
(01/01/2023-31/12/2023)
Previous year end
reporting period
(01/01/2022-31/12/2022)
Admission
(30/10/2019-
31/12/2023)
Ordinary NAV – start of period US$326.1 million US$363.0 million US$168.0 million
Ordinary NAV – end of period US$399.3 million US$326.1 million US$399.3 million
NAV per Ordinary Share – start of period US$1.54 US$1.71 US$1.04
NAV per Ordinary Share – end of period US$1.90 US$1.54 US$1.90
NAV movement per Ordinary Share +23.5% -10.2% +82.3%
Price per Ordinary Share – start of period US$1.21 US$1.78 US$1.04
Price per Ordinary Share – end of period US$1.40 US$1.21 US$1.40
Share price return
(i)
+16.0% -32.0% +34.9%
Benchmark returns
(ii)
Russell 2000 Biotech +10.6% -31.3% +4.8%
Nasdaq Biotech +3.7% -10.9% +29.4%
(i) Total shareholder return is an alternative performance measure.
(ii) Source: Capital IQ
Table 1. Financial Highlights
Executive summary
A full life cycle
approach to innovative
biotech investing
Strategic Report Governance Report Financial Statements Additional Information
Rocket’s share price bounced
back strongly in 2023 as it
continued to progress several
of its clinical programmes.
Most significantly, they reached
an agreement with the FDA
on a very efficient path to
registration for its Danon
disease gene therapy.”
Report of the Investment Manager
continued
RTW Investments, LP, the “Investment Manager”, a leading
global healthcare-focused investment firm with a strong track
record of supporting companies developing life-changing
therapies, created the Group as an investment fund focused
on identifying transformative assets with high growth
potential across the biopharmaceutical and medical
technology sectors. Driven by deep scientific expertise and
a long-term approach to building and supporting innovative
businesses, we invest in companies developing transformative
next-generation therapies and technologies that can
significantly improve patients’ lives while creating significant
value for our shareholders.
NAV performance in 2023 was overwhelmingly driven by
the core public portfolio with a +24.7% contribution to the
NAV. This is how the strategy is designed to function. As full
life cycle investors our belief is that in our sector the vast
majority of value creation happens post IPO, so we leverage
the conviction gained working with a company when it is
private to help us decide which are the best to keep post IPO,
so that we can participate in that value creation. Prometheus
Biosciences (+12.6%) and Rocket Pharmaceuticals (+8.4%)
accounted for the majority of the gain. Prometheus was
acquired by Merck for US$200.00 per share in cash, a 75%
premium to the prior closing price. Rocket’s share price
bounced back strongly in 2023 as it continued to progress
several of its clinical programmes. Most significantly, they
reached an agreement with the FDA on a very efficient path
to registration for its Danon disease gene therapy, which
received RMAT designation in February based on positive
safety and efficacy data from the Phase 1 trial. Cargo
Therapeutics (+2.0%) also deserves recognition. It is
one of our most exciting new investments. We co-led its
Series A financing round in March 2023 and anchored its
IPO in November. The shares have subsequently performed
New core
portfolio
companies
7
(2022: 3)
very well in the public markets. Avidity Biosciences was the
only material detractor (-3.2%) having reported disappointing
clinical data in myotonic dystrophy, which is a challenging
disease to target. We remain invested in Avidity, believing
that the next two muscle diseases they are targeting may
be easier to address.
The core private portfolio contributed +1.5% to NAV. Including
royalty investments, the contribution was +3.2%. JIXING was
the largest contributor (+1.7%) having initiated its Series D
financing round in November, which was co-led by RTW and
Bayer AG with whom JIXING also agreed a strategic
partnership agreement. Within the royalty segment, RTW
Royalty 2 (Urogen) contributed 1.0% and the investment in
RTW Royalty Fund contributed +0.6%. Neurogastrx (-0.5%)
was the only material detractor in the core private portfolio
having suffered a clinical setback in the first half of 2023 and
was in the process of winding down. The “other public”
segment of the portfolio contributed -0.7% to NAV.
Since admission, the Group has had fifty-four core positions.
On 31 December 2023, the average multiple on invested
capital (MOIC) of these positions (excluding Rocket
Pharmaceuticals, the only core position to be added to the
portfolio as a publicly traded name) stood at 1.7x. Within
that, the average MOIC of the eighteen exited positions is
2.7x. Twenty-nine of the positions (i.e. 54%) have generated
a positive return with an average MOIC (for the privates) of
2.7x, while twenty-four positions have generated a negative
return with an average MOIC of 0.6x, and one position
remains valued at cost. These ratios are roughly in line with
our expectations over the medium to long term, especially
when considering nearly two and half years of the four since
our admission have been in a sector bear market that was
particularly punishing for early-stage companies.
12
Figure 1. Performance drivers as of 31 December 2023 – Contributions to Ordinary NAV (%)
Decrease
Increase
2023 Contributors to Ordinary NAV (%)
12.6%
8.4%
2.0%
1.7%
1.7%
1.0%
1.6%
1.5%
0.9%
0%
25%
30%
20%
15%
10%
5%
35%
Prometheus*
Rocket
Cargo
Immunocore
Ji Xing
Apogee
Other core
privates up or flat
RTW Royalty
Fund 2
Cincor
Orchestra
Tarsus
Tourmaline
Other exited
core publics
Allurion
Milestone
"Other public"
portfolio
GH Research
Cash & Other
Avidity
Other core
privates down
0.8%
0.5%
0.3% 0.1%
-0.1%
-0.4%
-0.5%
-0.7%
-1.1%
-3.2%
-3.6%
Table 2. Performance of Rocket Pharmaceuticals from admission to 31 December 2023
Share price at admission
Share price at 31
December 2023 Share price return %
Rocket Pharmaceuticals US$14.00 US$29.97 114%
* Exited position
Strategic Report Governance Report Financial Statements Additional Information
13
JANUARY FEBRUARY MARCH APRIL MAY
Cincor Pharma
announced an agreement
to be acquired by
AstraZeneca for US$1.3
billion cash up front.
CinCor shareholders
also received a non-
tradable contingent
value right, payable upon
receipt of FDA approval.
Combined, these payments
represented a transaction
value of approximately
US$1.8 billion and a
206% premium.
Orchestra BioMed
announced the closing
of its merger with
RTW’s Health Sciences
Acquisition Corporation
2 and started trading on
the Nasdaq under the
ticker “OBIO”. Medtronic
joined as Orchestra’s
commercial partner,
anchoring the combination
alongside RTW.
OriCell Therapeutics
The Group and other
funds managed by RTW
co-led a US$45 million
Series B-1 financing round
of OriCell Therapeutics, a
China-based cell therapy
company.
Cargo Therapeutics
The Group and other funds
managed by RTW co-led a
US$200 million Series A
financing round in Cargo
Therapeutics, a clinical
stage CAR T-cell therapy
company.
Milestone
Pharmaceuticals
The Group announced its
participation in a US$125
million strategic financing
deal with Milestone
Pharmaceuticals. The
strategic financing
included US$50 million in
convertible notes from
RTW-managed funds,
including the Group, as well
as a commitment by RTW
of US$75 million in royalty
funding.
Mineralys
Therapeutics
went public through
an upsized initial public
offering, which raised
US$192 million, under
the ticker “MLYS”.
Prometheus
Biosciences
announced that it had
agreed to be acquired
by Merck for US$200.00
per share in cash, a 75%
premium to the prior
closing price, for a total
consideration of US$10.8
billion. The acquisition was
completed in June.
Allurion Technologies
The Group participated
in a bridge financing round
in Allurion Technologies,
a company with a
swallowable, procedureless
gastric pill balloon for
weight loss. Earlier that
month the company
announced its intention
to go public via a business
combination that closed in
August and included a PIPE
led by RTW Investments
and a non-dilutive,
synthetic royalty financing.
Abdera Therapeutics
The Group participated
in a Series B financing
of Abdera Therapeutics;
a pre-clinical stage
biopharmaceutical
company focused on
small cell lung cancer and
other solid tumours. The
company raised US$142
million in a combined
Series A and B.
Avidity Biosciences
announced that
discussions were ongoing
with the US FDA regarding
the partial clinical hold on
new participant enrolment
in its Phase 1/2 clinical
trial for AOC 1001 (treats
Myotonic Dystrophy).
Rocket
Pharmaceuticals
announced the addition
of a new cardiac gene
therapy programme, RP-
A601, for arrhythmogenic
cardiomyopathy due to
plakophilin 2 pathogenic
variants (PKP2-ACM).
Neurogastrx
announced the latest
data from its NG010
trial that indicated
the top-line primary
end point did not meet
statistical significance
and its resultant potential
liquidation.
Acelyrin
went public through an
upsized US$540 million
initial public offering under
the ticker “SLRN”.
Rocket
Pharmaceuticals
posted several positive
data updates from their
PKD, Fanconi Anaemia,
LAD-I and Danon Disease
programmes at the
American Society of
Cell and Gene Therapy
(“ASGCT”) conference.
Avidity’s
partial clinical hold was
eased. However, the
data from the higher
dose of AOC 1001 in the
muscular dystrophy trial
didn’t appear to further
reduce expression of toxic
DMPK, the hallmark of the
disease.
Key updates for Core Portfolio Companies during 2023:
CLINICAL
MILESTONES
FINANCIAL
MILESTONES
14
Report of the Investment Manager
continued
DECEMBERJULY SEPTEMBER OCTOBER NOVEMBER
Apogee Therapeutics
went public through an
upsized IPO. It raised
US$300 million at $17 per
share. The shares started
trading on Nasdaq under
the ticker “APGE”.
Beta Bionics
The Group participated
in the Series D financing
of Beta Bionics, a medical
technology company
focused on diabetes
management. The
company raised US$100
million to advance diabetes
technology with its iLet
Bionic Pancreas.
Cargo Therapeutics
went public through an
IPO raising US$281m. The
shares started trading on
Nasdaq under the ticker
“CRGX”.
Basking Biosciences
The Group participated
in a seed round financing
of Basking Biosciences,
a clinical stage company
focused on acute
thrombosis.
Tourmaline Bio
completed its merger
with public company,
Talaris Therapeutics,
alongside a US$75 million
private placement, and
the shares started trading
on the Nasdaq under the
ticker symbol “TRML”.
JIXING
completed the first
tranche of its Series D
financing. RTW co-led
the round alongside
Bayer AG with whom
JIXING also agreed a
strategic partnership
agreement focused on
cardiovascular diseases
and ophthalmology in
China.
Rocket
Pharmaceuticals
successfully aligned
with the FDA on its
registrational trial design
for its Danon Disease gene
therapy programme. This
is a significant milestone
for Rocket and for patients
with Danon Disease, as
it brings them closer to
a potential therapy for a
uniformly fatal, inherited
disease.
Orchestra BioMed
was granted FDA approval
to initiate a global pivotal
study for BackBeat CNT™
for the treatment of
hypertension in pacemaker
patients.
Milestone
Pharmaceuticals
received a refusal letter
from the FDA to file for a
New Drug Application for
Etripamil for the treatment
of PSVT. The FDA did not
express concerns about
the nature or severity of
adverse events. Rather, the
FDA determined that the
NDA was not sufficiently
complete to permit
substantive review and
requested clarification about
the time of data recorded
for adverse events in Phase
3 trials. Milestone has since
met with the FDA, with the
latter indicating that the
timing of adverse events
had minimal impact on the
overall characterisation of
Etripamil’s safety profile. To
align with the FDA, Milestone
will restructure certain
data sets, reformat certain
data files and resubmit the
NDA. Milestone expects
that this will address the
FDA’s letter. It expects a
standard review period
following resubmission which
is planned for Q2 2024.
Key updates for Core Portfolio Companies during 2023:
Strategic Report Governance Report Financial Statements Additional Information
15
Report of the Investment Manager
continued
Portfolio breakdown and new investments
We define the core public portfolio as companies that
were initially added to our portfolio as private investments,
reflecting the key focus of the Group’s strategy. Our
investment approach is defined as full life cycle and therefore
involves retaining private investments beyond their IPOs;
hence the core portfolio consists of both privately-held (41%)
and publicly-listed (59%) companies.
As of 31 December 2023, the Group’s core portfolio
accounted for 67% of NAV (2022: 71%) and included
36 companies (2022: 39), ranging from biotechnology
companies developing preclinical to clinical-stage therapeutic
programmes, companies developing traditional small molecule
pharmaceuticals, and med-tech companies developing and
commercialising transformative devices. We selected these
companies based upon our rigorous assessment of scientific
and commercial potential and with regard to the valuation of
the assets at the time of investment. Table 5 shows the top
fifteen portfolio companies at the end of the reporting period.
Private companies accounted for 17.6% of NAV on 31
December 2023 (2022: 24.6%) and core public companies
accounted for 39.3% (2022: 46.3%). “Core royalties” (9.8% of
NAV on 31 December 2023) was added as a portfolio segment
this year after the announcement of a capital allocation plan
in July in which royalty financing was highlighted as an
attractive and growing area of focus. These investments are
cash generative, providing life sciences exposure that is
uncorrelated to the volatility of the equity markets, and have
limited scientific risk due to their being typically constructed
around commercial products. The decrease in exposure to
private investments reflects the migration of several
positions into the core public portfolio as a result of IPOs
(Mineralys, Acelyrin, Apogee, and Cargo), a SPAC merger
(Orchestra BioMed) and a reverse merger (Tourmaline).
These events outweighed the addition of the new private
positions shown in Table 4. The lower exposure to the
core public portfolio reflects the aforementioned sales
of Prometheus to Merck and Cincor to AstraZeneca and
the exiting of our holdings in Monte Rosa, Ventyx, Tenaya,
Third Harmonic, C4, Acelyrin and Mineralys.
Approximately 20% of the Group’s NAV is invested in other
publicly listed companies, down from 29.8% on 31 December
2022. The “other public” portfolio is designed to mitigate the
drag of setting aside cash for future deployment into core
positions. This portfolio of assets has been carefully selected,
matching, on a pro-rata basis, the long investments held in
our private funds. The investments represented in this
portfolio are similarly categorised as innovative biotechnology
and medical technology companies developing and
commercialising potentially disruptive and transformational
products. When considered alongside available cash (12.9% on
31 December 2023 vs. -0.7% on 31 December 2022), the total
(33.3%) is similar to 31 December 2022 (29.1%). The increased
cash position was in preparation for the purchase of a stake in
Arix Bioscience, which is discussed in more detail elsewhere in
this report.
In July 2023, the Group announced a share buyback of up
to US$10 million as part of a capital allocation plan to deploy
the substantial cash proceeds of the Prometheus Biosciences
sale to Merck. In total, to the end of the reporting period, the
Group had bought back 1,753,791 shares for a consideration
of US$2,089,223, representing 0.8% of share capital.
As of 31 December 2023, the portfolio was diversified across
treatment modalities, therapeutic focus, and clinical stage.
While the portfolio is still majority invested in US-based
companies, we are committed to adding UK and EU
companies in an effort to support the best assets across
the globe and help foster local biotech ecosystems. By
constructing the portfolio in such a way, investors get
exposure to the most innovative parts of a highly specialised
sector with the explosive potential of companies that
successfully navigate clinical, regulatory or commercial
inflection points.
Looking forward, we expect the total portfolio sector
allocation to remain close to 80% biopharmaceutical assets
and 20% medical technology assets. In line with prospectus
guidance, we anticipate two-thirds of new investments will be
made in mid- to later-stage venture companies and one-third
focused on active company building around the discovery and
development or licensing and distribution of promising assets.
As per the announced capital allocation plan, royalty
investments will be limited to approximately 15% of NAV.
Portfolio segment
% of NAV at 31
Dec 2023
% of NAV at 31
Dec 2022
Core private 17.6% 24.6%
Core public 39.3% 46.3%
Core royalty¹ 9.8% –
Other public
20.4% 29.8%
Available Cash
2
12.9% -0.7%
Tot a l 100% 100%
1 In the prior annual report, royalty investments were included in the portfolio segment, Core private.
2 Prior periods reported the financial statement account “cash and cash equivalents”, while the current period and going forward will report Available Cash, as defined
in the Alternative Performance Measures.
Table 3. NAV capital breakdown as of 31 December 2023 and 31 December 2022
Core portfolio
companies
36
(2022: 39)
16
1
2
3
4
5
6
7
1
2
3
4
5
6
7
8
9
10
1
2
3
4
5
6
1
2
3
Core portfolio breakdown
Company name Description % NAV*
Oricell
Therapeutics
Preclinical stage pharmaceutical company focusing on multiple myeloma 0.6%
Cargo
Therapeutics
Clinical stage biotech company targeting large B-cell lymphoma 4.0%
Allurion
Technologies
Medtech company with a swallowable, procedureless gastric pill balloon for weight loss, commercially available in 5
countries, clinical stage in the U.S.
0.1%
RTW Royalty
Fund
RTW-created royalty dedicated fund that plans to invest in 5-10 royalty assets, thereby obtaining the rights to
future royalty payment streams. Fees will be taken at the Company level only (i.e. no double charging).
6.1%
Abdera
Therapeutics
Preclinical biopharma developing radiopharmaceuticals for lung cancer 0.3%
Tourmaline Bio Late-stage biotech developing medicines for thyroid eye disease and atherosclerotic cardiovascular disease 0.4%
Basking
Biosciences
Clinical stage company developing an RNA aptamer to treat acute thrombosis 0.1%
*As of 31 December 2023
Table 4. New core investments in 2023
Figure 2. Core portfolio breakdown, by (A) Modality, (B) Therapeutic focus, (C) Clinical stage and (D)
Geography as of 31 December 2023. These breakdowns do not include royalty vehicles.
1 Genetic Medicine
2 Small Molecule
3 Antibody
4 Cell Therapy
5 Medtech
6 Spec Pharma
7 Targeted Protein
Degradation
A) Modality
1 Rare Disease
2 Oncology
3 Cardiovascular
4 Inflammation
5 Opthalmology
6 T1 Diabetes
7 Neurology
8 Pulmonary
9 Orthodontic
10 Gastrointestinal
B) Therapeutics Focus
1 Commercial
2 Pivotal
3 Phase 3
4 Phase 2
5 Phase 1
6 Preclinical
1 US & Canada
2 UK & EU
3 Rest of World
D) GeographyC) Clinical Stage
Strategic Report Governance Report Financial Statements Additional Information
17
Table 5. Top fifteen core portfolio positions as of 31 December 2023
Portfolio company Description Therapeutic area
Clinical stage of lead
programme Expected catalysts % NAV
Rocket Gene therapy company for rare
paediatric diseases
Rare paediatric
diseases
Phase 2 Fanconi Anaemia BLA
filing Q1 2024; LAD1
approval in Q2
17.9%
JIXING RTW incubated company focused
on acquiring rights to innovative
therapies for development and
commercialisation in China
Cardiovascular,
Ophthalmology
Phase 3 Additional Series D
tranches in Q1 and Q2
7.9%
Immunocore T-cell receptor therapy company
focused on oncology and infectious
disease
Oncology Commercial PRAME data Q2 2024 7.4%
RTW Royalty Fund Royalty dedicated fund that will
invest in 5-10 royalty assets, thereby
obtaining the rights to future payment
streams
Multiple Commercial Refile Milestone NDA
mid-2024
6.1%
Cargo Biotech company targeting large
B-cell lymphoma
Oncology Phase 1 Interim Ph2 data possible
in 2024
4.0%
RTW Royalty 2 Royalty deal with Urogen for
JELMYTO, the first FDA-approved
treatment for low-grade upper
tract urothelial cancer
Oncology Commercial Quarterly sales updates 3.7%
Orchestra Medical device company focused on
developing products for the treatment
of coronary artery disease and
hypertension
Cardiovascular Pivotal Mid-2024 renegotiate
co-development of
Virtue programme
2.1%
Milestone Developing interventions for
tachycardias
Cardiovascular Registrational Refile NDA mid-2024 2.0%
Apogee Biopharma company developing
treatments for inflammation
Inflammatory Phase 1 Data updates in H1 2024 1.8%
Beta Bionics Closed-loop pancreatic system for
automated and autonomous delivery
of insulin
Type 1 Diabetes Pivotal Aiming for late 2024 IPO 1.7%
Tarsus Biotech company developing
therapeutics for ophthalmic
conditions
Ophthalmology Commercial Launch updates
quarterly
1.5%
Avidity Antibody conjugated RNA medicines Myotonic
dystrophy
Phase 1 Myotonic dystrophy Ph1
update Q1 2024
1.4%
NiKang Developing innovative small
molecules against promising
molecular targets in oncology
Oncology Phase 1 Data updates in Q3 2024 1.4%
Ancora Medical device company developing
products that target dysfunction
of the left ventricle, the underlying
cause of heart failure
Cardiovascular Pivotal Complete US pivotal
enrolment YE 2024
1.1%
Magnolia Medical diagnostics company that
has patented a steripath blood
collection device
Inflammation,
sepsis
Commercial Mid-2024 launch of new
low-cost automatic blood
diversion device
0.7%
18
Report of the Investment Manager
continued
19
Table 6. Core portfolio positions as of 31 December 2023 compared to 31 December 2022
Portfolio Company Private¹/ Public²
Valuation in US$
at 31/12/2023
% of Group’s net
assets at
31/12/2023
Valuation in US$
at 31/12/2022
% of Group’s net
assets at
31/12/2022
Rocket Public 76,751,123 17.9% 46,982,775 13.5%
JIXING Private 33,851,037 7.9% 25,225,606 7.3%
Immunocore Public 31,861,831 7.4% 25,908,924 7.4%
RTW Royalty Fund Private 25,982,258 6.1% – –
Cargo Public 17,181,097 4.0% – –
RTW Royalty 2 Private 15,873,634 3.7% 14,074,846 4.0%
Orchestra³ Public 9,146,636 2.1% 4,490,264 1.3%
Milestone⁴ Public 8,774,286 2.0% 2,871,141 0.8%
Apogee Public 7,802,385 1.8% 2,102,903 0.6%
Beta Bionics Private 7,283,681 1.7% 5,633,890 1.6%
Tarsus Public 6,563,082 1.5% 3,169,037 0.9%
Avidity Public 6,149,783 1.4% 14,502,829 4.2%
NiKang Private 5,841,773 1.4% 4,416,891 1.3%
Ancora Private 4,552,449 1.1% 4,163,943 1.2%
Magnolia Private 2,980,286 0.7% 2,403,543 0.7%
Umoja Private 2,948,739 0.7% 2,540,152 0.7%
Oricell Private 2,378,363 0.6% – –
Encoded Private 2,255,099 0.5% 2,364,636 0.7%
Kyverna Private 1,921,703 0.4% 1,455,105 0.4%
Tourmaline Public 1,861,346 0.4% – –
Nuance Private 1,789,691 0.4% 1,622,898 0.5%
GH Research Public 1,778,970 0.4% 2,981,309 0.9%
Numab Private 1,723,249 0.4% 1,768,384 0.5%
Lenz Private 1,677,798 0.4% 1,449,836 0.4%
Alcyone Private 1,419,169 0.3% 1,280,484 0.4%
Abdera Private 1,108,396 0.3% – –
Lycia Private 929,092 0.2% 1,008,626 0.3%
Artiva Private 890,476 0.2% 880,074 0.3%
Artios Private 760,071 0.2% 675,895 0.2%
InBrace⁵ Private 556,338 0.1% 649,150 0.2%
Cincor Public 541,706 0.1% 2,175,674 0.6%
Basking Private 449,058 0.1% – –
Allurion Public 283,948 0.1% – –
Neurogastrx Private 115,353 0.0% 1,612,974 0.5%
Prometheus Labs Private 105,808 0.0% 186,504 0.1%
Yarrow Private 64,228 0.0% 1,001,854 0.3%
1 Valuations for private portfolio companies on a fair value basis.
2 The valuations of public positions were calculated using their market capitalisation as of 31 December 2023
3 Includes shares held in the initial SPAC vehicle (HSAC2) that merged with Orchestra in January 2023
4 Includes pre-funded warrants
5 Previously referred to as Swift Health Systems
Table 7. RTW representation on portfolio company boards as of 31 December 2023
Portfolio company
1
RTW representative on the board
JIXING Rod Wong, Peter Fong, Gotham Makker
Magnolia Ovid Amadi
Nikang Chris Liu
Rocket Rod Wong, Gotham Makker, Naveen Yalamanchi
Yarrow Rod Wong, Peter Fong, Gotham Makker
RTW Royalty 2 Matthew Bieret
HSAC 2 Holdings, LLC Rod Wong, Naveen Yalamanchi, Alice Lee
1 In aggregate these represented 28% of the Group’s NAV at 31 December 2023
Table 8. Top 5 “Other Public” portfolio segment holdings as of 31 December 2023
Position Ticker % of NAV Description
Sage Therapeutics SAGE 2.7% Biopharmaceutical company for brain health disorders
Akero Therapeutics AKRO 2.5% Cardio-metabolic biotechnology company developing treatments for non-
alcoholic steatohepatitis
Mirati Therapeutics MRTX 2.2% Commercial stage biotechnology company targeting cancer
Axsome Therapeutics AXSM 2.1% Commercial stage biotech focused on CNS
PTC Therapeutics PTCT 1.7% Commercial stage biotech making therapies for rare genetic diseases
Strategic Report Governance Report Financial Statements Additional Information
20
19%
19%
29%
33%
Between 0 and 6 months
Between 7 months and 1 year
Between 1+ year to 2 years
More than 2 years
2022 20232020 2021
20
New investments
Number of IPOs
Other “Go Public”
15
10
5
0
Average multiple
on invested
capital to the
IPO price
1.7x
Average %
positions marked
up in 2023:
12.4%
Private Portfolio Valuations and Cash
RunwayAnalysis
The core private, core royalty, and core public portfolios are
the foundation of the Group’s strategy. They are built on our
rigorous assessment of the best private market investment
opportunities. We have always been highly selective in this
area, focusing only on companies with both well-founded
science and attractive commercial opportunities. We have
benefitted from this discipline as we emerge from a
challenging capital markets environment, with a private
portfolio that is a good size and well-funded.
As of 31 December 2023, the average cash runway of our core
private companies was over two years, which provides them
with sufficient time to focus on clinical development plans.
There are eight companies with less than twelve months of
runway, two of which are RTW company creations, which is
by design, as RTW’s funds have the flexibility to inject cash
when necessary. Of the remainder, most have reasonable and
well-formed capital raising plans in place. Only one is in a more
challenging financial position and has been written down in our
portfolio to an insignificant level.
Which brings us to our private valuations. We hold our private
company investments at ‘fair value’ i.e., the price that would
be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants. This is
assessed in accordance with US GAAP, utilising valuation
techniques consistent with the International Private Equity
and Venture Capital Guidelines including, but not limited to,
the income approach and the market approach. Valuations
are adjusted both during regular valuation cycles and on an
ad hoc basis in response to ‘trigger events’, which may include
changes in fundamentals, an intention to carry out an IPO,
or changes to the valuations of comparable public companies.
Our valuation process ensures that private companies are
valued in both a fair and timely manner.
The process is overseen by the RTW Valuation Committee.
The Committee is supported by RTW’s valuation team that
is independent from the investment team and receives advice
from two independent third-party valuation firms. The
Committee approves valuations of private company
investments on a monthly basis and utilises the analysis of an
independent third-party valuation firm no less frequently than
twice a year in helping to determine the fair value of each
material private investment. The valuations are also reviewed
twice per year by the Board as part of the interim and annual
reporting process and are subject to the scrutiny of KPMG.
The private portfolio saw a total of fifty-one valuation
adjustments in 2023. At year end, thirteen positions were
marked up by an average of 12.4%; ten were marked lower by
an average of -28.1%. The balance remained at cost given the
recent date of the investment. 70% of the markdowns were
primarily driven by changes to relative comparables or
market-based inputs. 54% of the markups were primarily
driven by comparables, and 46% were primarily driven by
idiosyncratic company performance, a financing round or
transaction. At year end, the average time since the last
third-party valuation was 3.7 weeks and with an average
of 1.3 years having elapsed since the last financing round.
The value of the private portfolio is best demonstrated by
the four portfolio IPOs in the year (which do not appear in
figure 5 because they were public companies or had since
been exited). The average step-up from the prior holding
value to the IPO price was 45.9%. The average multiple on
invested capital to the IPO price was 1.65x.
Figure 4. Core private portfolio –
approximate cash runway as of
31December 2023
Figure 3. New core private investments,
IPOs and other “Go Public” events¹ by year
since admission
1 Other “Go Public” events include SPAC mergers and
reverse mergers.
Report of the Investment Manager
continued
21
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Dec-23
Dec-98
Dec-96
Dec-97
Dec-99
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Mar ‘00 – Mar ‘03
-85% peak to trough
Aug ‘08 – Mar ‘09
-46% peak to trough
Jul ‘15 – Feb ‘16
-52% peak to trough
Feb – Mar 2020
-38% peak to trough
Aug – Dec 2018
-33% peak to trough
Feb ‘21 – Oct ‘23
-70% peak to trough
Prometheus Labs
Neurogastrx
Yarrow
InBrace
Numab
Artiva
Lycia
Abdera
Ancora
Magnolia
Nuance
Artios
Ji Xing
Nikang
RTW Royalty 2
Umoja
Alcyone
RTW Royalty Fund
Lenz
Therapeutics
Kyverna
NAV Contributions
Oricell
Basking
Beta Bionics
Encoded
60%
Reasons for valuation change:
Performance
Financing / Transaction
Comps / Market
-120%
40%
0.44% 1.03% 1.66% 0.13% 0.03% 0.04% 0.05% 0.05% 0.64% 0.07% 0.04% 0.01% 0.00% 0.00% -0.01% -0.01% -0.03% -0.02% -0.02% -0.01% -0.03% -0.02% -0.46% -0.43%
20%
0%
-20%
-40%
-60%
-80%
-100%
Sector review and outlook
The Federal Reserve’s interest rate pivot and a flurry of
takeouts helped the biotech sector avert a historic three
down years in a row with a sharp rally in the last two months
of the year. In October, the sector was close to recording and
setting new lows across most of the key metrics we track.
However, the sector’s vigorous move off the bottom gives
clues to how complacent the market had become. For the
past year and a half, selling exposure to the biotech sector
was an easy trade and worked even in the face of strikingly
low valuations, strong innovation, and accelerating M&A.
Those caught off-side the last two months of the year have
likely driven this early move. Capital flows are suggestive of
what may be in store for 2024. Flows were consistently
negative throughout 2023, with total outflows the highest in
three decades. Generalists have remained on the sidelines but
should that turn, it will be a significant tailwind for the sector.
Figure 6. Russell 2000 Biotechnology index value
Figure 5. Core private portfolio on 31 December 2023 – year to date valuation changes and
contributionsto NAV
Table 9. Private Valuation Statistics for 2023
Statistic 2023
Number of revaluations in 2023 51
Average time since last third party valuation (weeks) 3.7
Average time since last financing round (years) 1.3
Average valuation change -5.0%
Average mark-up +12.4%
Average mark-down -28.1%
Average step-up to IPO price +45.9%
Average MOIC to IPO price 1.7x
Strategic Report Governance Report Financial Statements Additional Information
2014
2015
2016 2022 2023
2013
2012
2019 2020 20212018
2011
2006 2007 2008 2009 2010
IPOs
Follow Ons
300
200
100
0
Figure 8. The US biopharma financing market is still digesting excess supply from the boom
in 2019-2021
2014
2015
2016
2023
2022
2013
2012
2019
2020
2021
2018
2017
2011
2010
2008
2009
$250
$200
Deal Value ($B)
Number of Deals
$150
$50
$110
$26
$0
$4
$14
$60 $59
$64
$53
$43
$195
$102
$48
$69
$140
$100
$50
$0
Number of deals
30
25
20
15
10
5
0
Deal Value ($B)
Source: Jefferies Report as of 26 December 2023
Source: Bloomberg and Lazard Monthly Life Sciences US Equity Issuance Overview as of 29 December 2023.
FDA approved
novel drugs
61
(2022: 37)
At the same time, the list of investible assets has declined
significantly. In the past year the acquisitions of Seagen,
Horizon, Karuna, Prometheus, Immunogen, Cerevel, Reata,
Televant, Iveric, Mirati, and Rayze totaled over US$140bn,
which amounts to about a third of acquirable US market
cap in the post-mega merger FTC era (i.e. companies with
a market cap below US$25bn). Investors will compete with
large pharma companies for the sector’s remaining marquee
assets. While Pfizer and AbbVie have made significant
progress on refilling their pipelines, Bristol and Merck must
Despite the end of year rally, 32% of sub-US$10bn market cap
biotech companies in the US still trade at less than the cash
on their balance sheets, down only 3% from the high. The
number of companies has started to decline, which is healthy.
Many of these are companies that never should have made it
out in the last bull market, but importantly, from a market
dynamic perspective, they now represent only a small
remain active or face existential patent cliff risk. Meanwhile,
companies like J&J, Roche, and the obesity giants, Eli Lilly and
Novo Nordisk, have over US$200bn of unused capacity that is
growing rapidly due to the transformation of obesity-related
products. In total, large pharma companies have about
US$600bn of dealmaking capacity and premiums are already
indicative of increased competition for assets. For deals over
US$1bn in 2023, the average deal premium was 71%, which is
right at the upper end of historical ranges. .
percentage of the sector’s market capitalisation. Even
then,digesting these companies over the last several years
has resulted in an IPO bear market. Twelve companies IPO’d
last year, down from nineteen the year before and 108 in 2021.
We think this is likely the bottom and expect normalcy to
return in 2024 with a slate of promising companies already
inthe pipeline.
Figure 7. 2023 was the second-best year ever for M&A value and best ever for volume
22
Report of the Investment Manager
continued
2014
2015
2016
2022
2023
2013
2012
2019
2020
2021
2018
2017
2011
2010
2008
2005
2003
2001
1999
1997
1995
1993
1994
1996
1998
2000
2002
2004
2006
2007
2009
70
NME Approvals
Cell&GTx
60
50
40
30
20
10
0
NME Filings/Approvals
Figure 9. The FDA approved 61 novel drugs in 2023, the highest in history
The most challenged part of the ecosystem should continue
to be companies with smaller products (sub-US$1bn peak
sales). Since the demise of Valeant catalysed the
disappearance of specialty pharma, there are few natural
buyers for sub-scale products, no matter how promising.
Lack of investor interest in such companies is instructive for
the FTC, which fails to understand the positive impact M&A
has on promoting competition and innovation in our sector.
Should any midsized biopharmas with financial flexibility
(e.g. Vertex, Regeneron, BioNTech, or Daiichi) emerge as
consolidators for smaller products, interest could return,
although we do not see evidence of this happening yet.
In 2022, the Inflation Reduction Act gave Medicare the ability
to dictate drug prices for small molecules nine years
post-launch. The drug industry has responded by shifting
innovation away from pills for the elderly. This most notably
impacts targeted oncology and cardiovascular disease. Of
course, these remain the leading causes of death in developed
In total, the FDA approved sixty-one novel drugs in 2023,
the highest number in one year in history. Drugs from new
modalities represented fourteen, one more than last year.
We continue to expect more new highs to be set in the coming
years. This is consistent with our belief that we are living
through a golden age of innovation in our sector, built on a
combination of cheap genetic information and the foundation
of new modalities to address disease. Looking forward, we are
excited about opportunities in several areas. Within metabolic
disease, we eagerly await the first approval for fatty liver
disease. In oncology, we have shifted our emphasis towards
novel antibody technologies (e.g. bispecifics, ADCs, radioRx)
and cell therapy. We expect continued innovation in neurology,
rare disease, and after a wave of historic breakthroughs,
slightly more incremental advances in immunology. Like gene
therapy this past year, we are optimistic RNA medicines could
make a comeback in 2024.
Post period-end Arix acquisition updates and
other key portfolio company events
Following the end of the period, there was no shortage of
Group-related news.
• In early January, the FCA approved a new prospectus in
relation to the proposed admission of new RTW Bio shares
pursuant to the Arix Bioscience acquisition.
• Also in early January, portfolio company JIXING announced
a new strategic partnership with Bayer AG focusing on
cardiovascular diseases and ophthalmology in China and
the initial closing of its Series D preferred stock financing,
co-led by Bayer and RTW Investments.
societies, so it is important to our collective future health to
support policy mitigations and litigation. A win in the courts in
the coming year has the potential to improve the status quo.
In all, there are nine legal challenges to the IRA’s Medicare
price negotiations including challenges from the likes of
Merck, Novo Nordisk and Johnson & Johnson.
Fortunately, new modalities, mostly not subject to
government price setting until thirteen years, have the
potential to take medical innovation to new heights. While
less convenient and safe, cell therapy and novel antibody
technologies have shown striking efficacy in multiple cancers.
RNA medicines also have the ability to address some
cardiovascular targets and have matured enough to offer
placebo-like safety profiles. Gene therapy made a strong
recovery this year. As the FDA has gained comfort with the
modality, Director of the Center for Biologics Evaluation,
Peter Marks, has led by offering regulatory flexibility for
companies pursuing urgent unmet needs.
• RTW Bio then completed the previously announced
US$57.1 million acquisition of a 25.5% stake in Arix from
a wholly owned subsidiary of Acacia Research Corporation.
• The Board of RTW Bio announced at the same time its
intention to increase capital returns to shareholders to
a total of up to US$30 million, post completion of the Arix
acquisition. This total includes the previously announced
share buyback of up to US$10 million. The Board believes
that this allocation clearly demonstrates its confidence in
the outlook for the biotech sector and the Group’s
portfolio and its capital allocation discipline, whilst also
providing additional liquidity to shareholders.
• The first general meeting and vote of Arix shareholders was
held on 29 January 2024, where the resolution to approve
the acquisition passed with 92% of votes cast in favour.
• On 8 February, core portfolio company Kyverna
Therapeutics announced the pricing of an upsized US$319
million IPO. As at 26 March 2024, Kyverna traded on
Nasdaq Global Select Market (under the ticker “KYTX”) at
US$24.86 per share, up 13.0% from the IPO price of
US$22.00 per share.
• The second general meeting of Arix shareholders was
held on 12 February 2024, where 98% of votes were cast in
favour of resolutions to successfully complete the scheme
of reconstruction and voluntary winding up of Arix.
RTW Investments, LP
27 March 2024
Privately-held
portfolio
companies
24
(2022: 25)
Strategic Report Governance Report Financial Statements Additional Information
23
Transforming the
lives of millions
Identify
transformational
innovations
RTW has developed expertise through a comprehensive
study of industry and academic efforts in targeted areas of
significant innovation. Thanks to the decoding of the human
genome, there is more clarity around the causes of disease.
Coupled with exciting new modalities that can address genetic
diseases in a targeted way, drug innovation is accelerating.
Our Strategy
in Action
page 26
RTW has developed repeatable internal processes, combining
technology and manpower to comprehensively cover critical
drivers of innovation across the globe. We seek to identify,
through rigorous scientific analysis, biopharmaceutical and
medical technology assets that have a high probability of
becoming commercially viable products, dramatically changing
the course of treatment, and bringing effective, or in some cases,
even fully curative outcomes to patients.
Our Strategy
in Action
page 26
Engage in deep
research to
unlock value
Our strategic
focus
Learn more
1
2
24
RTW’s Long-Term Strategy
RTW’s long-term strategy is anchored in identifying sources
of transformational innovations with significant commercial
potential by engaging in deep scientific research and a
rigorous idea generation process, complemented by years
of investment, company building, and both transactional
and legal expertise.
Build new companies
around promising
academic licences
RTW has capabilities to partner with universities and
in-license academic programmes, by providing capital and
infrastructure to entrepreneurs to advance scientific
programmes. Particularly in rare disease, there is often little
existing research and few treatment options, so forming a
rare disease-focused company is a way of shining a light on
this space and creating a roadmap to developing potentially
curative treatments.
A key part of RTW’s competitive advantage is the ability to
determine at which point in a company’s life cycle we should
support the target asset or pipeline. As a full life cycle investor,
RTW provides growth capital, creative financing solutions,
capital markets expertise, and guidance. Taking a long-term, full
life cycle approach and having an evergreen structure enables
us to avoid the pitfalls and structural constraints of venture-
only or public-only vehicles. RTW’s focus is on becoming the
best investors and company builders we can be, delivering
exceptional results to shareholders and making a positive
impact on patients’ lives.
Our Strategy
in Action
page 27
Our Strategy
in Action
page 27
Supports investments
through the full
life cycle
3 4
Strategic Report Governance Report Financial Statements Additional Information
25
Case study:
1
Learn more about Cargo Therapeutics
cargo-tx.com
The need
CAR-T therapy is a relatively new type of cancer treatment
that uses the body’s own immune system to kill cancer cells.
Transformative advances have been made by commercially
available CAR T-cell therapies; however, resistance
mechanisms can limit the strength and quality of T-cell
response and contribute to disease progression. Patients
whose disease relapses or is refractory to CD19 CAR T-cell
therapy face a median survival of less than 6 months.
Furthermore, treatments are not readily available to
many of the patients who could benefit from them due to
manufacturing challenges, supply constraints, unpredictable
turnaround time and other logistical challenges.
Mission
Cargo is a clinical-stage biotechnology company positioned to
advance next generation, potentially curative cell therapies
for cancer patients. Cargo’s programmes, platform
technologies, and manufacturing strategy are designed to
directly address the limitations of approved cell therapies,
including limited durability of effect, safety concerns and
unreliable supply.
Status
It was a transformational year for the company with growth
across the business, including expanding the leadership team
and creation of a Scientific Advisory Board, commencing a
Phase 2 clinical trial for CRG-022, and becoming a publicly
traded company. In March 2023, Cargo completed a
US$200m Series A financing round, which RTW co-led. The
proceeds from the financing round were to advance Cargo’s
autologous CD22 CAR T-cell therapy candidate, CRG-022,
through a pivotal multi-centre Phase 2 trial in patients with
LBCL whose disease has relapsed or is refractory to CD19
CAR T-cell therapy. In November, Cargo successfully IPO’d on
Nasdaq under the ticker “CRGX”, raising US$281.3 million. In
the two months from listing to 31 December 2023, Cargo’s
share price increased by approximately 54%.
Next milestone
Interim results from Cargo’s Phase 2 trial are anticipated
in 2025.
Cargo Therapeutics
NAV
4.0%
(2022: n/a)
Portfolio company
ownership
>5%
(2022: n/a)
We are pleased to continue to support
Cargo Therapeutics in their mission to
deliver innovative CAR-T cell therapy
to patients with cancer. Despite the
ongoing challenges in the capital markets,
with very little IPO activity, we continue
to see that good companies, such as
Cargo Therapeutics, with innovative
technologies and strong management
teams can access the public markets.”
Roderick Wong, MD
Managing Partner
Strategy in Action
26
JX10: Stroke
JX09: Hypertension
Case study:
2
JX08: Demodex blepharitis
OMECAMTIV MECABRIL: HfrEF
AFICAMTEN: nHCM
ETRIPAMIL: PSVT
AFICAMTEN: oHCM
AFICAMTEN: HfpEF
ETRIPAMIL: Atrial fibrillation (Afib)
OC-01: Dry eye disease
OC-02: Dry eye disease
LNZ100/101: Presbyopia
Learn more about JIXING
jixingbio.com
The need
China has a large cardiovascular disease patient population,
with an estimated prevalence of 270 million hypertension (high
blood pressure), 5 million cardiac arrhythmia (i.e. irregular
heartbeat, such as PSVT or atrial fibrillation), and 1.5 million
hypertrophic cardiomyopathy (enlarged heart) patients. It also
has an enormous aging population, with over 400 million
people suffering from presbyopia and 200 million people
suffering from dry eye disease.
Mission
Founded by RTW in 2019 and headquartered in Shanghai,
JIXING is a leading cardiovascular and ophthalmology biotech
that partners with other global biotech companies to develop
and commercialise novel, innovative therapeutics to treat
unmet medical needs in China and beyond.
NAV
7.9%
(2022: 7.3%)
Portfolio company
ownership
>5%
(2022: >5%)
JIXING Pharmaceuticals
Status
JIXING’s pipeline now includes 9 assets focused on
cardiovascular and ophthalmology conditions with high unmet
need through partnerships with Cytokinetics, Milestone,
LENZ Therapeutics, Oyster Pharma, and TMS.
In December 2023, Cytokinetics (CYTK) announced positive
topline results from SEQUOIA-HCM, the pivotal phase 3
clinical trial of Aficamten in patients with obstructive
hypertrophic cardiomyopathy, and a few days later JIXING
announced its own positive results from the China Cohort
trial of the same drug.
Next milestone
JIXING will complete additional closings of its Series D
financing in Q2 2024.
Discovery Preclinical Phase 1 Phase 2 Phase 3
NDA Prepared/
Submitted
Strategic Report Governance Report Financial Statements Additional Information
27
Market capitalisation
The Company’s market capitalisation increased from
U$257 million at 31 December 2022 to US$295 million at
31 December 2023. The Company issued no shares in 2023
and repurchased 1,753,791 shares, so the 15% increase in
market capitalisation was due to the 16% increase in the
share price, which was slightly offset by the decrease in
Ordinary Shares outstanding.
Ordinary NAV
The Ordinary NAV increased from US$326 million to
US$399 million during the year. The main driver of the
increase was the performance of the core public segment of
the portfolio, notably due to the sale of portfolio company
Prometheus Biosciences to Merck, adding 12.6% to the NAV,
and the share price performance of Rocket Pharmaceuticals,
adding 8.4%. Core private and core royalty investments
contributed another ~3%. The Group returned to positive
performance in 2023, which saw the return of a performance
allocation accrual.
An approximate attribution of the Company’s performance
is provided below
Core Public +24.7%
Core Royalty +1.7%
Core Private +1.5%
Other Public -0.7%
Cash & Other -3.7%
Net Performance +23.5%
Understand our
Key Performance
Indicators
page 30
Innovative asset growth
28
Operational and Financial Review for the Year
Highlights
Market Capitalisation as of 31 Dec 2023
Ordinary NAV as of 31 Dec 2023
Discount/premium to NAV as of 31 Dec 2023
Ongoing charges as of 31 Dec 2023
NAV per Ordinary Share
The +23.5% increase in NAV per Ordinary Share was driven
by the increase in the Company’s ordinary NAV and a slight
decrease in Ordinary Shares outstanding following share
repurchases.
Premium / discount
The Company’s shares traded on average at a c.25% discount
to NAV due to reduced market demand for growth and
venture capital assets during the reporting period. At year
end, the Company’s Ordinary Shares were trading at a 26%
discount to NAV (2022: 21% discount to NAV).
Total return to shareholders
based on ordinary NAV
As the Company has not paid dividends, the total return for
the year of +23.5% (2022: -10.2%) equates to the increase in
NAV per Ordinary Share. Performance allocation accrual was
triggered during the reporting period as the total shareholder
return based on ordinary NAV movements was positive.
Total return to shareholders
based on share price
The share price return of +16.0% in the year compared with
the NAV movement of +23.5% was the result of a decline in
demand for growth companies as interest rates increased
in the US and UK. Investors also assumed that private
companies within venture capital portfolios would be subject
to substantial market-based valuation adjustments leading to
a cyclical widening of share price discounts. Companies with
the highest proportion of private growth assets experienced
the most significant widening.
Ongoing charges
The Group’s ongoing charges ratio is 1.87% (2022: 1.92%),
calculated in accordance with the AIC recommended
methodology, which excludes non-recurring costs and uses
the average NAV in its calculation.
$295M
$399M
-26.0%
1.9%
$257M
$326M
-21.2%
1.9%
$378M
$363M
+4.1%
1.7%
2023
2023
2023
2023
2022
2022
2022
2022
2021
2021
2021
2021
Strategic Report Governance Report Financial Statements Additional Information
29
Our Key Performance Indicators
Measuring our performance
NAV Growth Total shareholder return Premium/discount to NAV
Performance Performance of the portfolio
companies and cash management
strategy net of all fees and costs
Delivering value to the shareholders The level of supply and demand for
the Company’s shares
Key factors • Portfolio performance and
progression through clinical trials
• Cash management
• Capital pool and deployment
• Scientific and financial risks
• Market context including interest
rates and bond yields
• Portfolio performance
• Liquidity of RTW shares
• General market sentiment
(in order of impact at year end)
• The percentage of private growth
assets within the Group’s portfolio
• Portfolio performance
• Liquidity of the Company’s shares
• Increased visibility with key UK
shareholder audience (London
office, UK distribution partner)
Progress Ordinary NAV
+23.5%
(2022: -10.2%)
During the reporting period this was
largely driven by public companies’
share price performance, most
significantly the realised gain from the
Prometheus acquisition by Merck.
Share Price Return
+16.0%
(2022: -32.0%)
A cyclical reduction in demand for
growth and venture capital assets led
to the company’s share price not
keeping up with the increase in NAV
per share, thus widening the discount
at which the shares trade.
Premium/discount to NAV
-25%
(2022: -13%)
(Average during the year)
Future intent Achieve superior long-term capital
appreciation; target an annualised
total return of 20% over the medium
term
Achieve superior long-term capital
appreciation; target an annualised
total return of 20% over the medium
term
Return to a premium to NAV such
that total shareholder returns match
or exceed NAV performance
Link to
strategy
1
Identifying
2
Engaging
3
Building
4
Suppor ting
1
Identifying
2
Engaging
3
Building
4
Suppor ting
1
Identifying
2
Engaging
3
Building
4
Suppor ting
Link to
principal risks
1
Failure to achieve
investment objective
6
Exposure to global political and
economic risks
7
Clinical Development &
Regulatory Risks
1
Failure to achieve
investment objective
6
Exposure to global political
and economic risks
7
Clinical Development
& Regulatory Risks
1
Failure to achieve
investment objective
6
Exposure to global political
and economic risks
FINANCIAL
30
The Board has identified the following
indicators for assessing the Group’s annual
performance in meeting its objectives:
Per cent of NAV invested in
core portfolio companies
Geographic & therapeutically
diversified portfolio
Active and robust pipeline
Level of capital deployment into core
portfolio companies
Performance
Measures the Group’s commitment to
invest in best-in-class science and
innovative assets worldwide
Delivers transformational new
treatments to patients in need.
• Level of capital deployment and
investment pace, as well as
availability of funds to be deployed
into new portfolio companies and
follow-on investments
Key factors
• Continue to diversify within the life
sciences sector and support local
biotech ecosystems across the
globe
• Balance and breadth of the pipeline
across all clinical stages
• Data readouts and progress
through multiple clinical stages
• Commercial opportunity and
competitive landscape
NAV invested in core portfolio
67%
(2022: 71%)
Deployed into core portfolio
companies
Progress
Therapeutic areas addressed
10
(2022: 10)
Core portfolio companies’ focus spans
multiple therapeutic areas, treatment
modalities and geographies.
Portfolio companies have leading
programmes in a clinical stage
22 of 36
(2022: 25 of 39)
Capturing a spectrum of early-stage
Phase 1 to late stage Pivotal
Identify transformative assets with
high growth potential across the
biopharmaceutical and medical
technology sectors
Future intent
Continue investing in and supporting
companies developing next generation
therapies and technologies that can
significantly improve patients’ lives
Progress towards delivering
transformational treatments to
patients in areas of high unmet need.
1
Identifying
2
Engaging
3
Building
4
Suppor ting
Link to
strategy
1
Identifying
2
Engaging
3
Building
4
Suppor ting
1
Identifying
2
Engaging
3
Building
4
Suppor ting
7
Clinical Development
& Regulatory Risks
4
The Investment Manager
relies on key personnel
6
Exposure to global political
and economic risks
Link to
principal risks
7
Clinical Development
& Regulatory Risks
6
Exposure to global political
and economic risks
7
Clinical Development
& Regulatory Risks
6
Exposure to global political
and economic risks
8
Imposition of pricing controls
NONFINANCIAL
Strategic Report Governance Report Financial Statements Additional Information
31
Risk Management
RTW’s long-term strategy is anchored
inidentifying transformative assets
withhigh growth potential across
thebiopharmaceutical and medical
technologysectors.
Driven by a deep scientific understanding and a long-term
approach to supporting innovative businesses, we invest in
companies developing next-generation therapies and
technologies that have the potential to significantly improve
patients’ lives. With this significant opportunity also comes risk.
RTW’s risk framework is overseen by the Audit Committee
under delegation from the Board. Multiple parties contribute
to managing risk, including the Board, the RTW Investments
team, and the Group’s advisers.
Risk framework
The risk framework begins with the Board, who define risk
appetite, oversee the process to ensure a robust assessment
of principal risks, consider current and potential risks, and
receive an update from the Investment Manager at each
Board meeting. A risk register is maintained that sets out
principal risks and risk appetite. The RTW team is responsible
for day-to-day operations and oversight of the risk
framework. RTW has a culture of transparency, ensuring that
developments are shared and addressed timely, with the
benefit of input from multiple team members, and reported
to the Board as appropriate. The Group relies on having
highly experienced personnel at the Investment Manager to
support and manage issues as they arise.
The Audit Committee oversees and monitors the risk
framework, including reviewing the risk register regularly to
ensure it properly captures principal risks, continuously
identifying potential risks, reviewing the ongoing operation
and effectiveness of the control environment, and ensuring
that proposed actions are implemented by the RTW team.
This process drives continuous improvement in risk
identification and monitoring.
Identifying principal and emerging risks
The Board uses both top-down and bottom-up inputs to
evaluate principal risks. Over the past year, the Board and the
Investment Manager had ongoing discussions to consider the
Group’s risks. The discussions generated insights into
potential emerging risks and have helped to focus attention
on additional areas for monitoring.
The RTW team carries out a bottom-up review, considering
each portfolio company, as well as internal operations, both as
a specific exercise and on an ongoing basis. The team also
draws on assessments made by management teams of
portfolio companies. These inputs are brought together in the
risk register, which is reviewed by the Audit Committee in
detail each quarter The principal risks identified by the Board
are set out on pages 34 to 36 of this annual report. These
have not substantially changed in the last year. The Board
also monitors future risks that may arise, including the
longer-term risks of changes to US pharmaceutical drug
pricing and US FDA productivity.
Applying deep scientific
expertise with a long-term
investment horizon
32
Risk management structure
Board of Directors
Risk management leadership; risk appetite
RTW Team
Risk management is integral to the investment process and financial management
Implementing and monitoring risk controls; risk reporting
Audit Committee
Reviews and monitors the risk framework
Other advisors
Risk identification; risk reporting
Portfolio companies’ management teams
Risk identification and mitigation
Risk appetite
The Board is willing to accept a certain level of risk in order
to achieve strategic goals. As part of the risk framework,
the Board sets the risk appetite in relation to each of the
principal risks and monitors the actual risk against it. Where
a risk is approaching or moves beyond its target, the Board
will consider the actions being taken to manage it. This year
the Audit Committee carried out a detailed review of the
defined risk types, to ensure that they continue to reflect
the understanding of the Board and accurately reflect
relevant risks. Following that review, the Audit Committee
advised the Board that the risk appetite remained
appropriate, and the Board has accepted that assessment.
Principal and
Emerging Risks
andUncertainties
page 34
Strategic Report Governance Report Financial Statements Additional Information
33
Principal and Emerging Risks and Uncertainties
Principal risks and
how we mitigate them
Risk description Risk control measure Profile
1
Failure to achieve investment objective
2
Unfavourable tax exposure
3
Counterparty risk
The Group’s target return on net assets is not
guaranteedand may not be achieved. There is increased
investment risk associated with the purchase of the Arix
Bioscience portfolio, but this is being offset by falling
interest rate risk.
With the recent acquisition of Arix and the integration
of the two portfolios, the Group’s structure has become
more complex. Along with this complexity comes potential
for new tax-related risk.
The Group has the potential to be exposed to the
creditworthiness of trading counterparties in OTC
derivatives contracts, its prime broker in the event of
re-hypothecation of its investments, and any counterparty
where collateral or cash margin is provided or where cash
is deposited in the normal course of business.
The Board will monitor and supervise the Group’s performance
compared to the target return, similar investment funds and
broader market conditions. Where performance is
unsatisfactory, the Board will discuss the appropriate response
with the Investment Manager. The Investment Manager’s team
is evaluating each investment in the Arix portfolio for suitability,
continued funding, or disposal, and communicating the
intended approach with the Board.
Strategic link
1
Identify
2
Engage
4
Suppor t
The Group has consulted throughout the planning and
execution of the acquisition transaction with legal counsel
having expertise in corporate structure and tax matters.
The Investment Manager’s team that was dedicated to the
transaction project, along with the Board, received advice and
evaluated structural options at every step, benefitting from
internal flexibility and expertise.
The Group uses Goldman Sachs, Morgan Stanley, Bank of
America Merrill Lynch, JP Morgan and Jefferies as prime
brokers and Cowen, UBS, Bank of America Merrill Lynch,
Goldman Sachs, Jefferies, and Morgan Stanley as ISDA
counterparties. To monitor counterparty risk, the Investment
Manager monitors fluctuations in share prices, percentage
changes in daily, monthly, and annual 5-year CDS spreads and
S&P credit ratings. If a counterparty group share price moves
up or down in excess of 20%, the trader at the Investment
Manager is alerted immediately. In case of an alert, the trader
notifies RTW’s Chief Compliance Officer. There has been no
disruption in operations with the Group’s counterparties to
date. The Group’s bankers are an offshore branch of Barclays
Bank PLC and are also included in the Investment Manager’s
CDS monitoring program.
Operational Risks
Investment Risks
Strategic link
1
Identify
2
Engage
Strategic link
1
Identify
2
Engage
3
Build
4
Suppor t
4
The investment manager relies on key personnel
The Investment Manager relies on the founder of RTW,
Roderick Wong M.D. Roderick Wong is a key figure at the
Investment Manager and is extensively involved in
investment decisions.
In the event that Roderick Wong was to no longer work for
the Investment Manager or was incapacitated, the Board is
able to terminate the Investment Management Agreement
within 180 days if a suitable replacement has not been found
and would consider whether it would be appropriate to wind
up the Group and return capital to shareholders, or to
appoint a new Investment Manager.
Governance/Reputational risks
Strategic link
1
Identify
2
Engage
3
Build
4
Suppor t
Stable
Stable
Stable
Increasing
34
Profile Profile
7
Clinical development & regulatory risks
5
Portfolio companies may be subject to litigation
Portfolio Companies may be subject to product liability
claims. Such liability claims would have a direct financial
impact and may impact market acceptance even if
ultimately rebutted.
The Investment Manager’s due diligence process includes
considering the risk that innovative therapies may have
unforeseen side effects, based on the Investment Manager’s
extensive sector knowledge and experience, published
research, and publicly available information.
Governance /reputational risks (continued)
Strategic link
1
Identify
2
Engage
3
Build
4
Suppor t
6
Exposure to global political and economic risks
It is anticipated that approximately 75% of investments
willbe in US companies or licensing agreements with US
institutions, and 25% of investments will be made outside
of the US. The Group’s investments will be exposed to
foreign exchange, and global political, economic, and
regulatory risks, including those associated with current
conflicts in Ukraine, Israel/Palestine, and the Middle East
more broadly. The portfolio currently has approximately
77% exposure to the US and Canada, 12% to the UK and
Europe, and 11% to the rest of the world, including 3.7% to
Israel and none to other Middle Eastern countries, Ukraine
or Russia. Israel exposure derives from Urogen Pharma,
which has R&D in Israel but is headquartered and
maintains its broader team in Princeton, New Jersey.
Strategic link
1
Identify
2
Engage
3
Build
4
Suppor t
The Investment Manager has extensive experience
transacting across the global healthcare marketplace and will
be responsible for identifying relevant events and updating
investment plans appropriately.
Stable
Risk description Risk control measure
External Risks
New drugs, medical devices and procedures are subject to
extensive regulatory scrutiny before approval, and
approvals can be revoked.
The Investment Manager’s due diligence process includes a
rigorous process of assessing preclinical and clinical assets
and their probabilities of success, utilising scientific, clinical,
commercial and regulatory benchmarks. Additionally, the
Investment Manager’s process includes assessing the likely
attitudes of regulators towards a potential new therapy. The
due diligence will also consider the unmet need of the disease
and whether the therapy offers advantages over the current
standard of care.
Strategic link
1
Identify
2
Engage
3
Build
4
Suppor t
Stable
Under the FCA’s Disclosure Guidance and
Transparency Rules, the Directors are
required to identify the material risks to
which the Group is exposed and the steps
taken to mitigate those risks.
The Group has five categories of risks
in its risk register namely:
• Investment Risks
• Operational Risks
• Governance/Reputational Risks
• External Risks
• Emerging Risks
Portfolio company products may be subject to price
controls, price gouging claims, and other pricing regulation
in the US and other major markets. Government healthcare
systems may be major purchasers of the products.
While future political developments cannot be reliably
forecast, the Investment Manager’s due diligence process
includes an assessment of political risk and the likely
acceptability of the investee’s pricing intentions.
8
Imposition of pricing controls for clinical products and services
Strategic link
3
Build
4
Suppor t
Stable
Increasing
Strategic Report Governance Report Financial Statements Additional Information
35
Principal and Emerging Risks and Uncertainties
continued
10
Availability of capital
Funding for smaller public companies is scarce. The IPO
market is at its lowest level in a decade and follow-on
offerings remain below average. With a near record
number of companies trading at less than 1x their cash
balances, the market appears to believe that not all
companies will survive.
The Investment Manager is experienced in identifying potential
in companies that have strong fundamentals at attractive
valuations that create an asymmetric and attractive risk/
reward profile. The Board reviews the financing status of the
Group’s private portfolio with the Investment Manager at least
twice each year. Less than 3% of the Group’s NAV is exposed to
companies that will need refinancing within the next 12 months
and most of these companies have re-financing plans in place.
The acquisition of Arix and the successful sale of Prometheus
Biosciences has added significant working capital to the Group,
which has further mitigated this risk.
Strategic link
1
Identify
2
Engage
3
Build
4
Suppor t
Reducing
9
Inflation
The unprecedented level of fiscal and monetary stimulus
that has been applied to the global economy has caused
US inflation to surge to a 40-year high and resulted in
sharp declines in the share prices of technology firms
without current earnings as the cost of capital increased
following a series of rapid increases in interest rates by
central banks.
The creation of value through innovation in the biotechnology
sector outweighs the singular and/or short-term adjustment
to valuation levels arising from changes in discount rates as a
result of rising inflation. The Investment Manager holds
investments that have current earnings and cash-flows and
has significant exposure to Phase 3 products which have a
high probability of achieving cash-flows in the near-term.
Whilst the pace of interest rate increases has moderated in
reaction to reductions in US inflation, it is not possible to say
that this risk is reducing yet, as inflationary pressures remain.
Strategic link
1
Identify
2
Engage
3
Build
4
Suppor t
Stable
External Risks (continued)
Emerging Risks
11
Sustainability reporting
12
Liquidity risk
Sustainability reporting standards are evolving rapidly and
investors may require more detailed sustainability
disclosures to maintain or add new positions in our shares.
The Board monitors sustainability reporting standards
and is advised by the Group’s service providers, including
an external sustainability consultant. The Group has adopted
a responsible investment policy in the current year to
formalise its long-standing social investment objective
and approach and also appointed a Sustainability Committee
to provide oversight and advice in relation to the Company’s
responsible investment strategy.
Strategic link
1
Identify
2
Engage
3
Build
4
Suppor t
The Investment Manager closely monitors counterparty
exposures in its portfolio companies. Exposures to bank
failures have been minimal. Portfolio companies will typically
manage their treasury functions on a prudent basis,
spreading exposure over several counterparties thereby
avoiding catastrophic losses from any single failure. Where
the Investment Manager becomes aware of significant risk
concentration, it will engage with investees to encourage
more prudent diversification. The Board also notes that, to
date, regulators have ensured that no depositors have lost
funds in such banking failures although it recognises that this
may not necessarily be achieved in the future.
Many investees are not yet at the stage in their life cycle
where they are cash-generative and enjoy stable,
predictable free cash-flow. They have typically raised
significant amounts of cash which are held in bank deposits
and liquid securities to meet operational requirements until
their next planned capital raising round or IPO. There have
been several high-profile bank failures, some of which, but
not all, are to some extent attributable directly or indirectly
to rising policy interest rates and rising long-term yields in
response to sustained inflationary pressures. To the extent
that investees keep their cash on deposit at such banks,
there is a risk that they may suffer a partial or total loss of
capital and suffer a consequent liquidity crisis threatening
their ability to continue planned development.
Stable
Stable
Risk description Risk control measure Profile
36
Longer Term Viability Statement
Realising a robust
and resilient company
Assessing the prospects of the Company
The corporate planning process is underpinned by scenarios
that encompass a wide spectrum of potential outcomes.
These scenarios are designed to explore the resilience of the
Group to the potential impact of significant risks set out
below.
The scenarios are designed to be severe but plausible and
take full account of the availability and likely effectiveness of
the mitigating actions that could be taken to avoid or reduce
the impact or occurrence of the underlying risks and which
would realistically be open to management in the
circumstances. In considering the likely effectiveness of such
actions, the conclusions of the Board’s regular monitoring and
review of risk and the Investment Manager’s internal control
systems, as discussed on page 50, is taken into account.
The Board reviewed the impact of stress testing the
quantifiable risks to the Group’s cash flows as detailed in risk
factors 1-5 in the previous pages and concluded that the
Group, would have sufficient working capital to fund its
operations in the following extreme scenario:
(1) The Group incurred NAV losses of 40% of NAV over a
three-year period ending 28 February 2027.
(2) No new capital was raised.
(3) US$154 million of private investments were funded from
cash and by selling public portfolio investments over the
three-year period ending 28 February 2027.
To provide some context for this scenario the worst-case
annual losses for the NASDAQ Biotech Index (NBI) in the last
10 years were 8.9% in 2018 and 21.4% in 2016 respectively.
The Group’s three-year loss scenario exceeds the cumulative
impact of both of these worst-case years of 40.4% spread
over three years. The annualised volatility of the NBI index for
the last 10 years is 25.3% and the index has an annualised
return of 6.9% for this period. An annual loss of 40% or more
would represent a 1.86 standard deviation loss and is only
likely to occur every thirty-two years if the index returns are
normally distributed. Considering this context, a cumulative
loss of between 36% and 40% is therefore assumed to be a
reasonable stress test.
The Board considers that this stress testing-based
assessment of the Group’s prospects is reasonable in the
circumstances of the inherent uncertainty involved.
The period over which we
confirm longer term viability
Within the context of the corporate planning framework
discussed above, the Board has assessed the prospects of the
Group over a three-year period ending 28 February 2027.
Whilst the Board has no reason to believe the Group will not
be viable over a longer period, given the inherent uncertainty
involved, the period over which the Board considers it
possible to form a reasonable expectation as to the Group’s
longer-term viability, based on the stress testing scenario
planning discussed above, is the three-year period to March
2027. This period is used for the Investment Manager’s
business plans and has been selected because it presents the
Board and therefore readers of the Annual Report with a
reasonable degree of confidence whilst still providing an
appropriate longer-term outlook.
Confirmation of longer term viability
The Board confirms that it has carried out a robust
assessment of the emerging and principal risks facing the
Group, including those that would threaten its business
model, future performance, solvency or liquidity. Based upon
the robust assessment of the principal and emerging risks
facing the Group and its stress testing-based assessment of
the Group’s prospects, the Board confirms that it has a
reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the period to February 2027.
On behalf of the Board
William Simpson
Chair
27 March 2024
Profile
Strategic Report Governance Report Financial Statements Additional Information
37
Engaging with Stakeholders (Section 172)
Shareholders Service providers
Continued access to capital is vital to the
Group’s longer term growth objectives, and
therefore, in line with its objectives, the
Group seeks to maintain shareholder
satisfaction through:
• Positive risk-adjusted returns
• Continuous communication of portfolio
updates
• Regular access to Investment Manager
commentary on portfolio decisions and
outlook
METHODS OF ENGAGEMENT
The Group engages with its shareholders
through the issuance of regular portfolio
updates in the form of RNS announcements.
The Investment Manager hosts mid-year and
year end webinars and Q&A sessions and in
2023 hosted its inaugural Capital Markets
Day in London.
The Group provides in-depth commentary
onthe investment portfolio, corporate
governance and corporate outlook in its Annual
and Interim Reports and financial statements.
The Board receives quarterly feedback
fromits brokers and distribution partner
inrespect of investor engagement and
investor sentiment.
In 2023 the Group appointed distribution and
investor relations company Cadarn Capital to
improve the flow of information to current
and potential shareholders.
The Group works closely with a number of
service providers (the Investment Manager,
Administrator, Sub-Administrator, Corporate
Secretary, auditor, third party valuation
agents, corporate brokers, distribution
partner, and other professional advisers).
The independence, quality and timeliness
of their service provision is critical to the
success of the Group.
METHODS OF ENGAGEMENT
The Group has identified its key service
providers and on an annual basis undertakes
a review of performance based on a
questionnaire through which it also seeks
feedback.
Furthermore, the Board and its sub-
committees engage regularly with service
providers on a formal and informal basis.
The Group regularly reviews all material
contracts for service quality and value.
BENEFITS OF ENGAGEMENT
The Group enjoys a supportive shareholder
base that understands the investment
strategy as a result of our active programme
of events and meetings.
The Group has built a large pool of potential
investors to support its future growth.
BENEFITS OF ENGAGEMENT
Feedback given by service providers is
usedto review the Group’s policies and
procedures, to ensure open lines of
communication, and operational efficiency.
Performance reviews ensure the Board’s
confidence that the Group is being serviced
and advised by high quality service providers.
In 2023, the Group appointed Numis as
corporate joint broker and Cadarn Capital as
distribution partner.
Close collaborators
and committed partners
The AIC Code requires
thatthe matters set out in
Section 172 of the Companies
Act 2006 are reported on by
all companies, irrespective of
domicile, provided this does
not conflict with local
company law.
Section 172 recognises that directors are
responsible for acting in a way that they
consider, in good faith, to be most likely
to promote the success of the Group for
the benefit of all shareholders. In doing so,
they are also required to consider the
broader implications of their decisions
and the Group’s operations on key
stakeholders, the wider community, and
the environment. Key decisions are those
that are either material to the Group or
are significant to any of the Group’s key
stakeholders. The Group’s engagement
with key stakeholders and the key
decisions that were made or approved
by the Directors during the year are
described below.
38
Portfolio Companies HM Government
The Group is currently invested in 36 Core
Portfolio Companies.
METHODS OF ENGAGEMENT
The Investment Manager engages on a
regular basis with its portfolio companies in
order to conduct on-going due diligence and
to meet obligations if the Investment
Manager holds a board seat.
METHODS OF ENGAGEMENT
The Group funds assets developed in UK
academic and private sector laboratories,
from conception to commercialisation.
BENEFITS OF ENGAGEMENT
Honesty, fairness and integrity of the
management teams of the portfolio
companies are vital to the long-term success
of the Group’s investments.
BENEFITS OF ENGAGEMENT
By supporting the local biotech ecosystem
in the country where the Group is listed, UK
government policy initiatives are supported
and promoted.
Community & environment
The Company does not have any direct
employees and does not anticipate any
material impact to its business model from
climate change but aims to to be a good
steward, in line with its socially-aligned
investment objective.
RTW Charitable Foundation was created
by the Investment Manager with the vision
to work towards a world free of ultra-rare
disease. The foundation funds research of
rare conditions that do not attract significant
outside investment due to limited commercial
opportunity.
METHODS OF ENGAGEMENT
RTW Charitable Foundation represents an
extension of the Investment Manager’s
mission. Its research process helps RTW
identify important causes of human suffering
and introduces the firm to individuals and
organisations trying to make a difference.
BENEFITS OF ENGAGEMENT
Climate change impact
The Group and the Directors minimise air
travel by making maximum use of video
conferencing for Company related matters.
RTW Charitable Foundation
Acting and investing responsibly provides the
necessary foundation for the long-term
sustainability of investment success.
To research grant recipients, RTW Charitable
Foundation offers financial support and
guidance gleaned from the Investment
Manager’s experience in drug development
and company building. The Foundation also
offers support to humanitarian causes,
initiatives that raise disease awareness, and
programmes with direct local community
impact, including days of action and youth
mentorship.
Strategic Report Governance Report Financial Statements Additional Information
39
ESG: Environmental, Social and Governance Topics
Responsible Investment
The Group aims to achieve positive absolute performance
and superior long-term capital appreciation, focusing on
forming, building, and supporting world-class life sciences,
biopharmaceutical, and medical technology companies
supporting their pursuit of superior pharmacological or
medical therapeutic assets to enhance quality of life or extend
patient life. The Investment Manager’s team of scientists and
researchers work tirelessly to evaluate the science behind
thousands of treatments and potential cures for diseases and
conditions in order to improve quality of life across the globe.
As a guiding principle, they prioritise overall positive impact
on patients and long-term meaningful outcomes to society
and believe this is the foundation of the Group’s success.
The Group’s social investment objective directly aligns with
Goal 3 of the UN Sustainable Development Goals (“SDG”)
whilst having regard to broader sustainability considerations.
As an investor in novel therapies, supporting biotech, medical
device, and diagnostics development, the implementation of
the above objective occurs in the context of environmental
and social risks and opportunities specific to the sector.
The Group has adopted a Responsible Investment policy
outlining the Investment Manager’s approach to incorporating
environmental and social characteristics into the investment
process, on behalf of the Group. It was designed in line with
guidance from the Principles of Responsible Investment and
is built around the pillars of Governance, Strategy, Risk
Management, and Metrics, which are the pillars of the
Taskforce on Climate-related Financial Disclosures and the
International Sustainability Standards Board. The Board has
established a Sustainability Committee to oversee the
Investment Manager’s implementation of the policy.
UN SDG goal 3
RTW
headquarters
As a long-term investor, the Group (via the Investment
Manager) seeks to meet regularly with the management teams
of portfolio companies. This approach fosters long-term
relationships with company management teams. This ongoing
dialogue enables open discussions on issues that could affect
long-term returns. Management may be engaged on a variety
of issues, including sustainability matters that present a
potential material risk or an opportunity for the Group.
The Group adopts a positive screening methodology,
implemented by the Investment Manager. At the origination
stage, potential investments are thematically screened to
ensure they align with the sustainable investment objective
and adopted strategy.
Monitoring is also in place such that the Company can
understand the core portfolio’s sustainability impact
periodically and inform the engagement strategy to address it.
The core portfolio of investments typically makes use
of outsourced providers (such as contract research
organisations), as this reduces the scale of physical presence
(e.g., laboratory space). The direct use of natural resources
is therefore limited.
The Investment Manager’s operations are highly
concentrated in its primary office space located in a building
that is LEED Gold Certified based on, among other things,
the sustainability of its location, water efficiency, energy and
atmosphere characteristics, use of materials and resources,
indoor environmental quality, and innovation.
The Investment Manager espouses a strong culture of
compliance, risk management and ethical behaviour. It aims
always to act in the best interests of shareholders, employees
and stakeholders. Its corporate code of ethics addresses the
largest areas of risk pertaining to the alternative asset
management industry, including but not limited to conflicts of
interest, anti-bribery, employee investing, insider trading and
political contributions. Furthermore, it seeks to ensure that
investments do not lead to negative impacts on public health
or well-being or contribute to human or labour rights
violations, corruption, serious environmental harm or other
actions which may be perceived to be unethical. It seeks
long-term investment partners that evidence equivalent
professional and ethical rigour.
40
02  GOVERNANCE REPORT
42 Biographies of Directors
44 Report of the Directors
47 Corporate Governance Report
52 Statement of Directors’ Responsibilities
53 Directors’ Remuneration Report
56 Report of the Audit Committee
Governance
Report
The Board has overall responsibility for maximising the
Group’s success by directing and supervising the affairs
of the business and meeting the appropriate interests of
shareholders and relevant stakeholders, while enhancing
the value of the Group and also ensuring the protection
of investors.
Strategic Report Governance Report Financial Statements Additional Information
4141
Biographies of Directors
Paul Le Page
Independent
Non-Executive Director
William Simpson
Chair and Independent
Non-Executive Director
Resident
Committees
Board meetings
attended
Appointed
Guernsey, British Isles
2 October 2019
Chair of the Management Engagement Committee
Chair of the Sustainability Committee
Member of the Audit Committee
Member of the Nomination Committee
Member of the Remuneration Committee
12/12 12/12
Guernsey, British Isles
2 October 2019
Chair of the Audit Committee
Member of the Nomination Committee
Member of the Remuneration Committee
Member of the Management Engagement Committee
Member of the Sustainability Committee
Roles and
responsibilities
William Simpson is the Chair and an independent director
based in Guernsey providing services to investment and
other financial services companies. William has over 30
years’ experience within the financial services industry.
He previously practiced law in the course of which he
advised on the establishment of a wide range of investment
funds and related matters. William graduated in law from
Leeds University and first qualified as an English barrister.
William is a member of the Guernsey Bar. William also holds
directorships at Ninety One Premier Funds PCC Limited,
Handelsbanken Alternatives Fund Limited, AHL Strategies
PCC Limited, Man AHL Diversified PCC Limited and Alpha
Real Trust Limited.
Paul Le Page is a former executive Director and Senior
Portfolio Manager of FRM Investment Management Limited,
a subsidiary of Man Group, and holds non-executive
directorships at a number of London Stock Exchange listed
investment funds. Mr. Le Page was formerly Audit Committee
Chair of Bluefield Solar Income Fund Limited, UK Mortgages
Limited, Thames River Multi Hedge PCC Limited and
Cazenove Absolute Equity Limited. Mr. Le Page has 20 years’
Audit Committee chair experience within the closed-end
investment fund sector and has a broad-based knowledge
of the global investment industry and product structures.
Mr Le Page graduated from University College London and
later received an MBA from Heriot Watt University. He
originally qualified as a Chartered Engineer and led the
development of clinical diagnostic instrumentation and
software and robotic sample preparation equipment prior to
commencing a career in finance. Mr Le Page is a director of
two other LSE premium-listed companies NextEnergy Solar
Fund Limited and TwentyFour Income Fund Limited.
Our collective power builds
success around brilliant ideas
42
Stephanie Sirota
Non-Executive Director
William Scott
Independent
Non-Executive Director
12/12 8/12
Guernsey, British Isles
3 October 2019
Chair of the Nomination Committee
Chair of the Remuneration Committee
Member of the Audit Committee
Member of the Management Engagement Committee
Member of the Sustainability Committee
Member of the Sustainability Committee
Non-UK resident
2 October 2019
William Scott has served continuously as an independent
non-executive director of a number of London-listed
investment companies and funds for over 20 years and has
been involved in the sector more widely for four decades.
From 2003 to 2004, Mr. Scott worked as Senior Vice
President with FRM Investment Management Limited,
subsequently part of Man Group. Previously (from
1989–2002), Mr. Scott was a portfolio manager and latterly
a director at Rea Brothers (which became part of the Close
Brothers group in 1999 and where he was a director of Close
Bank Guernsey Limited) and before that was an Assistant
Investment Manager with the London Residuary Body
Superannuation Scheme (1987-1989). Mr. Scott graduated in
physics from the University of Edinburgh in 1982 and is a
Chartered Accountant having qualified with Arthur Young
(now EY) in 1987. Mr. Scott also holds the Securities Institute
Diploma and is a Chartered Fellow of the Chartered Institute
for Securities & Investment. He is also a Chartered Wealth
Manager. His other directorships include Worsley Investors
Limited, which is listed on the Premium Segment of the
London Stock Exchange.
Stephanie A. Sirota, serves as a Partner and Chief Business
Officer at RTW Investments, LP. Ms. Sirota is responsible for
strategy and oversight of the firm’s business development,
strategic partnerships, communications, and investor
relations. Her background in investment banking and
expertise in financial markets has helped position the firm
as both a partner to life sciences companies and a steward
of investors’ capital. She also manages RTW’s relationships
with key partners including banks, academic institutions,
corporations, investors, and NGOs and has led the firm’s
entry into the UK and European markets. Prior to joining
the Investment Manager, from 2006 to 2010, she served as a
director at Valhalla Capital Advisors, a macro and commodity
investment manager. From 2000 to 2003, Ms. Sirota worked
in the New York and London offices of Lehman Brothers,
where she advised on various mergers & acquisitions, IPOs,
and capital market financing transactions. She began her
career on the Fixed Income trading desk at Lehman Brothers,
structuring derivatives for municipal issuers from 1997 to
1999. Ms. Sirota graduated with honours from Columbia
University and also received a Master’s Degree from the
Columbia Graduate School of Journalism. She is a member
of the New York Philharmonic Advisory Counsel and serves
as President of RTW Charitable Foundation.
Strategic Report Governance Report Financial Statements Additional Information
43
Report of the Directors
Report of the Directors
Principal activities
Further information on the principal activities of the Group
can be found on pages 06 to 07.
Change of name
On 22 June 2023, the Company changed its name from RTW
Venture Fund Limited to RTW Biotech Opportunities Ltd.
The Board believes that this name better places it amongst
its listed healthcare and biotech investment company peers
and more accurately reflects the Group’s full life cycle
approach to biotech investing, as a partner that can invest
in both the private and public domains and across the capital
structure with the flexibility to focus on where the most
attractive opportunities exist. The Subsidiary, RTW Biotech
Opportunities Operating Ltd, also changed its name from
RTW Venture Fund Operating Limited. Shareholders were
unaffected by the change of name, and the Company’s TDIMs,
ISIN and SEDOLs all remained the same.
Business review
On 1 November 2023, the Company announced it had made
a bid to acquire Arix Bioscience plc’s assets. On 29 January
2024, the shareholders of Arix voted to accept the offer,
with 92.22% of votes cast voting in favour, and the acquisition
completed on 13 February 2024. Further details are provided
on page 09.
A review of the Group’s business and its likely future
development is provided in the Chair’s Statement on pages
08 to 09. The underlying investments of the Group are
reviewed in the Investment Manager’s Report on pages
10to23.
Results and distributions
The results of the Group for the year are shown in the
audited consolidated statement of operations on page 76.
The Net Asset Value of the Group as at 31 December 2023
was US$429.0 million (2022: US$347.9 million).
For the year ended 31 December 2023, the Group recorded
a net total return based on NAV per Ordinary Share of +23.5
per cent (2022: -10.2 per cent).
No dividends were paid during the years ended 31 December
2023 and 31 December 2022. The Company does not
anticipate paying any dividends on its Ordinary Shares,
as it intends generally to re-invest proceeds received from
Portfolio Company sales or distributions. There have been no
changes in the Company’s dividend policy from that disclosed
in the Prospectus published by the Company on 14 October
2019.
During the year ended 31 December 2023, the Company
bought back 1,753,791 Ordinary Shares at an average price of
US$1.19 for a total cost of US$2,093,411, including transaction
costs of $4,178. At the date of approval of these consolidated
financial statements, all 1,753,791 of the Ordinary Shares were
held as treasury shares (31 December 2022: nil).
Capital structure
The Company is an authorised closed-ended Guernsey
investment company with registered number 66847. The
Company’s Ordinary Shares are listed on the Official List of
the FCA and to trading on the Premium Segment of the
London Stock Exchange plc’s Main Market under the ticker
symbols RTW (USD quote) and RTWG (GBP quote).
The Board believes the Premium Segment of the Main Market
is the most appropriate platform for the continued growth of
the Group by increasing the Group’s profile, broadening its
shareholder register, adding Sterling denomination, and
facilitating the Group’s eligibility for inclusion in the FTSE UK
Index Series.
As at 31 December 2023, the Company’s issued share capital
was 212,389,138 Ordinary Shares (2022: 212,389,138 Ordinary
Shares and 1 Performance Allocation Share), of which 1,753,791
Ordinary Shares were held in treasury (2022: no shares held
in treasury). Therefore, the total number of voting rights in
the Company as at 31 December 2023 was 210,635,347 (2022:
212,389,138).
On 13 February 2024, 181,901,165 new Ordinary Shares were
issued to satisfy the acquisition of the Arix assets, of which
48,322,863 were issued to the Subsidiary in respect of its
shareholding in Arix. Approval to cancel those Ordinary
Shares issued to the Subsidiary will be sought at the
Company’s 16 May 2024 AGM. In addition, the Company
bought back 5,550,000 Ordinary Shares from 1 January 2024
to 26 March 2024, and 394,290,303 Ordinary Shares were in
issue, of which 7,303,791 were held in Treasury, at the time of
signing this Annual Report.
Further issues of shares will only be made if the Directors
determine such issues to be in the best interests of
shareholders and the Group as a whole. Relevant factors in
making such determination include net asset performance,
share price rating, perceived investor demand and any
regulatory restrictions. In the case of further issues of
Ordinary Shares (or sales of Ordinary Shares from treasury),
such Ordinary Shares will only be issued at prices that are not
less than the prevailing NAV per Ordinary Share announced as
of the end of the immediately preceding month in which such
Ordinary Shares are being issued.
Authority to issue shares
Subject to the Company’s Articles of Incorporation, the
Directors have the power to issue an unlimited number
of shares.
Authority to buy back shares
The current authority of the Company to make market
purchases of up to 31,837,132 Ordinary Shares (being 14.99
per cent of the issued share capital) as authorised at the AGM
of the Company on 21 June 2023. At the AGM scheduled to
take place on 16 May 2024, the Board will seek to renew such
authority. Any buy back of Ordinary Shares will be made
subject to the Companies Law and within any guidelines
established from time to time by the Board and the making
and timing of any buy backs will be at the absolute discretion
of the Board and not at the option of the shareholders.
Ordinary Shares will only be repurchased at a price which,
More on results
for the year
page 65
Section 172
page 38
Chair’s
Statement
page 08
Investment
Manager’s Report
page 10
The Directors hereby submit the annual report and audited consolidated financial statements
for the Group for the year ended 31 December 2023.
44
Relations with shareholders
The Board welcomes shareholders’ views and places great
importance on communication with its shareholders. The
Company’s Annual General Meeting provides a forum for
shareholders to meet and discuss issues with the Directors
of the Company. The Chair and other Directors are also
available to meet with shareholders at other times, if
required. In addition, the Company maintains a website which
contains comprehensive information (https://www.rtwfunds.
com/rtw-biotech-opportunities-ltd), including company
notifications, share information, financial reports, monthly
NAVs, investment objectives and policy, investor contacts
and information on the Board and corporate governance.
Further information on relations with shareholders and other
stakeholders can be found in Engaging with Stakeholders
(Section 172) on pages 38 to 39.
Annual General Meeting
The Annual General Meeting (“AGM”) of the Company will be
held on 16 May 2024 at 1st Floor, Royal Chambers, St Julian’s
Avenue, St Peter Port, Guernsey GY1 3JX. Details of the
resolutions to be proposed at the AGM, together with
explanations, appear in the Notices of Meetings which are
being sent to shareholders in due course.
Members of the Board, including the Chair and the Audit
Committee Chair, will be in attendance at the AGM and will
be available to answer shareholder questions.
Shareholdings of the Directors
Directors’ shareholdings in the Company are disclosed in the
Directors’ Remuneration Report.
Directors’ appointment, tenure and re-
election, and Directors’ remuneration
Directors’ appointment, tenure and re-election and Directors’
remuneration are disclosed in the Directors’ Remuneration
Report.
Articles of Incorporation
The Company’s Articles may only be amended by special
resolution of the shareholders.
Key service providers
Independent auditor
KPMG Channel Islands Limited (“KPMG”) has been appointed
to serve as the Company’s auditor. In such capacity, the
auditor is responsible for auditing and expressing an opinion
on the consolidated financial statements of the Group in
accordance with applicable law and auditing standards.
Investment Manager
The Directors are responsible for the determination of the
Group’s investment policy and have overall responsibility
for the Group’s business activities. The Group and the
Investment Manager have entered into the Investment
Management Agreement (as amended, supplemented or
after repurchase costs, represents a discount to the Net
Asset Value per Ordinary Share and where the Directors
believe such purchases will enhance shareholder value. Such
purchases will also only be made in accordance with the
Listing Rules of the UK Listing Authority which provide that
the price to be paid must not be more than 5 per cent above
the average of the middle market quotations for the Ordinary
Shares for the five business days before the shares are
purchased unless previously advised to shareholders.
In accordance with the Company’s Articles and Companies
Law, up to 10 per cent of the Company’s Ordinary Shares may
be held as treasury shares. At 31 December 2023, 1,753,791
Ordinary Shares were held in treasury, representing 0.83 per
cent of the issued share capital (2022: no shares held as
treasury).
Directors’ dealings in shares
The Company has adopted a share dealing code for the Board
and will seek to ensure compliance by the Board with the
terms of the share dealing code. The share dealing code is
compliant with the UK Market Abuse Regulation.
Major shareholders
As at 31 December 2023 and 26 March 2024, insofar as is known to the Company, the following parties were interested, directly
or indirectly, in 5 per cent or more of the Ordinary Shares in issue:
31 December 2023 26 March 2024
Shareholder
Shareholding
(Ordinary
Shares) % Holding
Nature of
Holding
Shareholding
(Ordinary
Shares) % Holding
1
Nature of
Holding
Bluestem Partners, LP 34,093,156 16.19% Direct 34,093,156 8.81% Direct
Roderick Wong 29,693,872 14.10% Indirect 29,693,872 7.67% Indirect
Ducasse Group Limited 18,361,456 8.72% Direct <5%
1 The percentage shareholdings have been diluted following the issue of 181,901,165 new Ordinary Shares on 13 February 2024 to satisfy the
acquisition of the Arix assets.
Details of the voting rights can be found in Note 9.
Details of voting
rights
page 95
Principal and
Emerging Risks
and Uncertainties
page 34
Longer Term
Viability
Statement
page 37
Strategic Report Governance Report Financial Statements Additional Information
45
Report of the Directors
continued
modified from time to time), pursuant to which the
Investment Manager has been appointed as the Group’s
Investment Manager and has been delegated the authority
and responsibility to manage the Group’s investment
portfolio. The fees payable to the Investment Manager and
the impact of the Group’s restructuring on the Investment
Management Agreement are disclosed in Note 10.
Administrator and Sub-Administrator
The Group has appointed Elysium Fund Management Limited
to undertake the administration, corporate secretarial,
corporate governance and compliance services. Morgan
Stanley Fund Services USA LLC has been appointed to serve
as the Group’s Sub-Administrator.
Corporate Brokers
BofA Securities and Numis Securities have been appointed as
joint corporate brokers and financial advisers to the Group on
11 February 2022 and 5 April 2023 respectively.
Distribution Partner
In order to increase the liquidity of the Company’s Ordinary
Shares and to improve communication with shareholders, on
17 April 2023, Cadarn Capital was appointed as distribution
partner for the Group.
Change of control
There are no agreements that the Group considers
significant and to which the Company is party that would take
effect, alter or terminate upon change of control of the Group
following a takeover bid.
Principal and emerging risks and
uncertainties
The Group’s assets consist of investments in promising
therapies and technologies in the pharmaceutical industry.
There is inherent uncertainty in the long-term viability of
developing biopharmaceutical technologies and whether these
technologies can translate scientific theory into commercially
viable business opportunities. Its principal and emerging risks
are therefore related to the particular circumstances of the
businesses in which it is invested. The Group seeks to
mitigate these risks through active asset management
initiatives and carrying out due diligence work on potential
targets before entering into any investments.
Each Director is aware of the risks inherent in the Group’s
business and understands the importance of identifying,
evaluating and monitoring these risks. The Board has adopted
procedures and controls that enable it to manage these risks
within acceptable limits and to meet all of its legal and
regulatory obligations.
The Board considers the process for identifying, evaluating
and managing any significant risks faced by the Group on an
on-going basis and these risks are reported and discussed at
Board meetings. It ensures that effective controls are in place
to mitigate these risks and that a satisfactory compliance
regime exists to ensure all applicable local and international
laws and regulations are upheld. Particular attention has been
given to the effectiveness of controls to monitor liquidity risk,
asset values and counterparty exposure.
For each material risk, the likelihood and consequences are
identified, management controls and frequency of monitoring
are confirmed and results reported and discussed at the
quarterly Board meetings and through updating of the
Group’s risk matrix. An extraction of the highest rated risks
post mitigation forms the basis of the Principal and Emerging
Risks and Uncertainties disclosure in the Strategic Report on
pages 34 to 36.
The financial risks of the Group are discussed in Note 8 to the
consolidated financial statements.
The Group’s other risk factors are fully discussed in the
Company’s Prospectus, available on the Group’s website
(https://www.rtwfunds.com/rtw-biotech-opportunities-ltd)
and should be reviewed by shareholders.
Going concern
In forming a view on whether the Company is a going concern,
the Directors have considered the following factors:
• A three-year stressed cash-flow forecast prepared by the
Investment Manager for the purposes of assessing viability;
• A viability and going concern memorandum from the
Investment Manager on the Group’s business model and
operations (please see the Longer Term Viability
Statement on page 37);
• The Group’s ability to access liquidity from liquid
investments and to raise additional capital both during and
after the current financial year end.
After making enquiries and given the nature of the Group
and its investments, the Directors are satisfied that it is
appropriate to continue to adopt the going concern basis in
preparing the consolidated financial statements, and, after
due consideration, the Directors consider that the Company
is able to continue for the foreseeable future.
On behalf of the Board
William Simpson
Chair
27 March 2024
46
Corporate Governance
Report
The Board recognises the value of sound corporate governance
and, in particular, has regard to the requirements of the UK
Code (available from the FRC’s website, www.frc.org.uk).
The Company is a registered closed-ended investment
scheme pursuant to the POI Law and the Registered
Collective Investment Schemes Rules 2021 issued by the
GFSC. The GFSC Code applies to all companies that hold a
licence from the GFSC under the regulatory laws or which are
registered or authorised as Collective Investment Schemes,
which includes the Company. The GFSC has stated in the
GFSC Code that companies which report against the UK
Code or the AIC Code are deemed to meet the GFSC code,
and need take no further action.
The Company’s prospectus dated 14 October 2019 stated
that the Company would comply with the UK Code. The
Company is a member of the AIC and the Board of the
Company has accordingly considered, and resolved to follow,
the principles and recommendations of the AIC Code
(available from the AIC’s website, https://www.theaic.co.uk).
The AIC Code addresses all the principles set out in the UK
Code, as well as setting out additional principles and
recommendations on issues that are of specific relevance to
investment companies such as the Company. The Board
considers that reporting against the principles and
recommendations of the AIC Code (which incorporates the
UK Code) provides better information to shareholders whilst
meeting the requirements of the GFSC Code.
For the reasons set out in the preamble to the UK Code, the
Board considers certain of these provisions are not relevant to
the position of the Group as an externally managed investment
group. In particular, all of the Group’s day-to-day management
and administrative functions are outsourced to third parties.
As a result, the Group has no chief executive or any executive
directors, employees or internal operations and has therefore
not reported further in respect of these provisions.
The Directors recognise the value of the AIC Code and have
taken appropriate measures to ensure that the Group has
complied and continues to comply, as far as possible given the
Group’s size and nature of the business, with the AIC Code,
except as set out below:
Senior Independent Director – Provision 14 of the AIC Code
states a Board should consider appointing one independent
non-executive Director to be the Senior Independent
Director. Having taken into account its small size and that the
Chair and two of the other three Directors are each similarly
independent and non-executive, the Board considers it
unnecessary to appoint such a Senior Independent Director.
All members of the Board are available to shareholders if they
have unresolved concerns.
The Board is cognisant of the FCA’s target to have 40% of
board positions held by women and notes that it currently
only achieves 25% female representation. Considering the
increase in scale achieved by the Arix acquisition, the Board
believes it an appropriate time to recruit an additional
independent Director with relevant industry expertise and is
in the process of reviewing potential candidates. Both gender
and ethnic diversity factors will be considered by the Board
when making any new appointments or replacing current
Board members (see the Directors’ Remuneration Report
on page 53).
The Board and its Committees
The Board monitors developments in corporate governance
to ensure the Board remains aligned with best practices,
especially with respect to the increased focus on diversity
(see the Directors’ Remuneration Report on page 53).
The Directors of the Company at the date of this report
are William Simpson (Chair of the Board, Chair of the
Management Engagement Committee and Chair of the
Sustainability Committee), Paul Le Page (Chair of the Audit
Committee), William Scott (Chair of the Nomination and
Remuneration Committee) and Stephanie Sirota. The Board
believes the current Board members have the appropriate
qualifications, experience and expertise to manage the Group.
The Director’s biographies can be found on page 42 to 43.
The Board meets at least on a quarterly basis. The dates
for each scheduled meeting are planned at the beginning of
the year and confirmed in writing in accordance with the
Company’s Articles of Incorporation. Meetings for urgent
issues may be and are convened at short notice if all Directors
are informed. In addition to formal Board and/or committee
meetings and, to the extent practicable and appropriate, the
Directors maintain close contact with each other, the
Investment Manager and the Administrator, by email and
conference calls, for the purpose of keeping themselves
informed about the Group’s activities. The Board requires
information to be supplied in a timely manner by the
Administrator and other advisors in a form and of a quality
appropriate to enable it to discharge its duties.
The Board has delegated certain responsibilities to its
Audit Committee, Management Engagement Committee,
Nomination and Remuneration Committee and Sustainability
Committee (together the “Committees”). Given the size and
nature of the Board it is felt appropriate that all independent
Directors are members of the Committees.
Biographies
ofDirectors
page 42
Strategic Report Governance Report Financial Statements Additional Information
47
Corporate Governance Report
continued
Management Engagement Committee
The Management Engagement Committee is chaired by
William Simpson. The committee currently consists of William
Simpson, William Scott and Paul Le Page. The Management
Engagement Committee meets at least once a year pursuant
to its terms of reference, which are available on the
Company’s website https://www.rtwfunds.com/rtw-biotech-
opportunities-ltd.
The Management Engagement Committee provides a formal
mechanism for the review of the performance of the
Company’s advisers, including the Investment Manager. It
carries out this review through consideration of a number of
objective and subjective criteria and through a review of the
terms and conditions of the advisers’ appointments with the
aim of evaluating performance, identifying any weaknesses and
ensuring value for money for the Company’s shareholders.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee is chaired by
William Scott. The committee currently consists of William
Scott, William Simpson and Paul Le Page. The Nomination and
Remuneration Committee meets at least once a year
pursuant to its terms of reference, which are available on the
Company’s website https://www.rtwfunds.com/rtw-biotech-
opportunities-ltd.
Further information of the Nomination and Remuneration
Committee, Board diversity and Directors’ remuneration are
provided in the Directors’ Remuneration Report on pages 53
to 55.
Sustainability Committee
During the year, the Board considered it appropriate to form
a Sustainability Committee to consider responsible investing,
ESG matters and reporting, and regulatory updates, amongst
other things. On 6 June 2023, Terra Instinct was appointed to
advise the Group with respect to ESG matters. The
Sustainability Committee is chaired by William Simpson.
A summary of the Group’s approach to environmental and
social matters is provided in Responsible Investment on
page40.
The roles and responsibilities of the Committees are set out
in the terms of reference and are summarised below.
Items are discussed and, as appropriate, matters are
endorsed, approved or recommended to the Board by the
Committees. The chair of each of the Committees provides
the Board with a summary of the main discussion points at
the Committee meetings and any decisions made by the
Committee along with any recommendations which require
Board approval.
The Board may also delegate certain functions to other
parties; in particular the Directors may delegate to the
Investment Manager. However, the Directors retain
responsibility for exercising overall control and supervision of
the Investment Manager. Matters reserved for the Board
include, amongst others, approval and oversight of the
Group’s investment activities by ensuring that the Group has
complied with its investment restrictions. The Board also
reviews the performance of the Group against its target
return (as defined in the Prospectus) and, in light of the
current market conditions, considers the strategy taken by
the Investment Manager. Approval of the Annual and Interim
Reports, announcements, and dividends are also reserved for
the Board.
Audit Committee
The Audit Committee is chaired by Paul Le Page with formally
delegated duties and responsibilities within written terms of
reference, which are available on the Company’s website
https://www.rtwfunds.com/rtw-biotech-opportunities-ltd.
Further information on the Audit Committee is included in the
Report of the Audit Committee on pages 56 to 59.
Directors’
Remuneration
Report
page 53
Board meeting attendance
The Board meets at least four times a year, with further ad hoc Board and Board Committee meetings as required. Between
meetings, there is regular contact with the Secretary and the Company’s Brokers, as necessary.
The attendance record of the Directors for the year is set out below:
Director
Scheduled
Board Meetings
(1)
Audit
Committee Meetings
Management
Engagement
Committee Meetings
Nomination and
Remuneration
Committee Meetings
William Simpson 12/12 7/7 1/1 1/1
Paul Le Page 12/12 7/7 1/1 1/1
William Scott 12/12 7/7 1/1 1/1
Stephanie Sirota
(2)
8/12 n/a n/a n/a
(1) Two ad hoc Board meetings that were held in the year have not been included in this total. All of the Directors attended the two ad hoc
Board meetings in the year.
(2) Ms Sirota is not a member of the Audit Committee, Management Engagement Committee or Nomination and Remuneration Committee,
however from time to time she is invited to attend and did so at most meetings held during the year. Due to the matter to be discussed at
one Board meeting during the year, Ms Sirota recused herself from attending that meeting.
48
Board performance and evaluation
In accordance with Provision 26 of the AIC Code, the Board is
required to undertake a formal and rigorous evaluation of its
performance on an annual basis. Such an evaluation of the
performance of the Board as a whole and the Chair is carried
out under the mandate of the Board in the form of self-
appraisal questionnaires and a detailed discussion to
determine effectiveness and performance in various areas as
well as the Directors’ continued independence.
The performance and effectiveness of the Directors is
assessed annually having regard to the specific
responsibilities of each Director as described in their service
agreements.
To date, the Board has not engaged in the use of an external
facilitator. The Directors believe that the current mix of skills,
experience, ages and length of service of the Directors is
appropriate to the requirements of the Group. With any new
Director appointment to the Board, induction training will be
provided.
Directors’ conflicts of interest
All of the Directors are non-executive. William Simpson and
William Scott are directors of a number of funds managed by
members of the Man group of companies. Paul Le Page was
employed by Man Group until 31 December 2019 and was a
director of the investment managers of those funds. None
of the Directors were responsible for the appointment of
the others, the decision in respect of which was made by
an independent party. Having considered the information
disclosed above, the Board has concluded that William
Simpson, Paul Le Page, and William Scott remain independent
under provision 10 of the AIC Code. The Board considers
Messrs Simpson, Le Page and Scott as independent of each
other and free from any business or other relationship that
could materially interfere with the exercise of their
independent judgment. The Board when taken as a whole is
independent of the Investment Manager. Ms Sirota is a Board
representative of the Investment Manager and is therefore
not considered independent.
The Chair of the Board must be independent and is appointed
in accordance with the Company’s Articles of Incorporation.
Mr Simpson’s independence is evaluated annually and he is
considered to be independent because he:
• has no direct or indirect current or historical employment
with the Investment Manager; and
• has no current directorships in any other entities (other
than the Company and its subsidiaries) for which the
Investment Manager provides services.
Duties and responsibilities
The Board has overall responsibility for maximising the
Group’s success by directing and supervising the affairs of the
business and meeting the appropriate interests of
shareholders and relevant stakeholders, while enhancing the
value of the Group and also ensuring the protection of
investors. A summary of the Board’s responsibilities is as
follows:
• statutory obligations and public disclosure;
• strategic matters and financial reporting;
• risk assessment and management including reporting,
compliance, governance, monitoring and control; and
• other matters having a material effect on the Group.
The Board is responsible to shareholders for the overall
management of the Group. The Board has adopted a
Schedule of Matters Reserved for the Board which sets out
the particular duties of the Board, which demonstrates the
seriousness with which it takes its fiduciary responsibilities.
Such reserved powers include decisions relating to the
determination of investment policy and approval of changes in
strategy, capital structure, statutory obligations and public
disclosure, and entering into any material contracts by the
Group.
The Directors have access to the advice and services of the
Administrator, which is responsible to the Board for ensuring
that Board procedures are followed and that it complies with
the Companies Law and applicable rules and regulations of
the GFSC and the LSE. Where necessary, in carrying out their
duties, the Directors may seek independent legal or other
professional advice and services at the expense of the Group.
As a result of the use of professional service providers and
the nature of the Group’s operations, the Group does not
have any employees.
The Group maintains appropriate Directors’ and Officers’
liability insurance in respect of legal action against its
Directors.
The Board’s responsibilities for the Annual Report are set out
in the Statement of Directors’ Responsibilities on page 52.
The Board is also responsible for issuing appropriate Interim
Reports and other price-sensitive public reports.
The primary focus at Board meetings is to review the Group
strategy, investment performance and associated matters
such as share price discount/premium, investor relations,
peer group information, gearing and industry issues and to
consider recommendations from the Audit Committee and
other Committees of the Board, as appropriate.
Biographies
ofDirectors
page 42
Statement of
Directors’
Responsibilities
page 52
Strategic Report Governance Report Financial Statements Additional Information
49
Report of the
Audit Committee
page 56
Corporate Governance Report
continued
Listing requirements
Following Initial admission to the SFS on 30 October 2019 and
subsequent admission to trading on the Premium Segment of
the London Stock Exchange, the Company became subject to
the Prospectus Rules, the Disclosure Guidance and
Transparency Rules (as implemented in the UK through the
Financial Services and Markets Act 2000 of the United
Kingdom, as amended), the Market Abuse Regulation and the
admission and disclosure standards of the London Stock
Exchange.
Since admission to the SFS and subsequent admission to
trading on the Premium Segment of the London Stock
Exchange, the Company has complied with the applicable
Listing Rules.
Common Reporting Standard and Tax
Reporting requirements
The Common Reporting Standard (“CRS”) is an information
standard for the automatic exchange of information
developed by the Organisation for Economic Co-operation
and Development. CRS is a measure to counter tax evasion
and it builds upon other information sharing legislation, such
as FATCA, the UK-Guernsey Intergovernmental Agreement
for the Automatic Exchange of Information, and the European
Union Savings Directive. Under the UK-Guernsey IGA, certain
disclosure requirements may be imposed in respect of certain
shareholders in the Group who are, or are entities that are
controlled by one or more, residents of the United Kingdom.
In addition, under FATCA, the Group is required to make
certain disclosures and reports to further compliance with
the legislation’s requirements. It is the Group’s policy to
comply with applicable requirements under CRS, the
UK-Guernsey IGA and FATCA.
AIFMD
The Directors have considered the impact of AIFMD on the
Group and its operations. The Company is a non-EU domiciled
Alternative Investment Fund and the Investment Manager has
been appointed as the Group’s non-EU AIFM. As the Group is
managed by a non-EU AIFM, only a limited number of
provisions of AIFMD apply. The Investment Manager has made
the notifications or applications and received, where relevant,
approvals for the marketing of the Ordinary Shares to
“professional investors” (as defined in AIFMD) in the United
Kingdom and (with effect from 8 January 2024) Belgium.
Internal control and financial reporting
The Directors acknowledge that they are responsible for
establishing and maintaining the Company’s system of
internal control and reviewing its effectiveness. Internal
control systems are designed to manage rather than
eliminate the failure to achieve business objectives and can
only provide reasonable but not absolute assurance against
material misstatements or loss. The Directors review all
controls including operations, compliance and risk
management. The key procedures which have been
established to provide internal control are:
• The Board monitors the actions of the Group and
undertakings of any external consultant as appointed by
the Group at regular Board meetings and is given frequent
updates on developments arising from the operations and
strategic direction of the underlying investee companies.
The Board has also delegated administration and company
secretarial services to the Administrator; however, it
retains accountability for all functions it delegates.
• The Board clearly defines the duties and responsibilities
of the Group’s agents and advisers and appointments are
made by the Board after due and careful consideration.
The Board monitors the ongoing performance of such
agents and advisers and will continue to do so.
• The Administrator maintains a system of internal control
on which they report to the Board. The Board has
reviewed the need for an internal audit function and has
decided that the systems and procedures employed by the
Administrator provide the assurance that a sound system
of risk management and internal control should, which
safeguards shareholders’ investment and the Group’s
assets. An internal audit function specific to the Group
is therefore considered unnecessary.
The systems of control referred to above are designed to
ensure effectiveness and efficient operation, internal control
and compliance with laws and regulations. In establishing the
systems of internal control, regard is given to the materiality
of relevant risks, the likelihood of costs being incurred and
costs of control.
The need for an internal audit function is discussed in the
Report of the Audit Committee.
50
The UK Modern Slavery Act
The Board conducts the business of the Group ethically
and with integrity, and has a zero-tolerance policy towards
modern slavery in all its forms. As the Group has no
employees, all of its Directors are non-executive and all its
functions are outsourced, there are no further disclosures
to be made in respect of employees and human rights. The
Board notes that the companies in which the Group invests
directly or indirectly may have employee, community, human
rights or social impacts of which the Board has no visibility
or control.
Litigation
So far as the Directors are aware, no litigation or claim
of material importance is pending or threatened against
the Group.
On behalf of the Board
William Simpson
Chair
27 March 2024
Anti-bribery and corruption policy
The Board has a zero-tolerance approach to instances of
bribery and corruption and has reiterated its commitment
to carry out business fairly, honestly and openly. Accordingly,
it expressly prohibits any Director or associated persons,
when acting on behalf of the Group, from accepting, soliciting,
paying, offering or promising to pay or authorise any payment,
public or private, in the United Kingdom or abroad to secure
any improper benefit for themselves or for the Group. The
Investment Manager has also adopted a zero-tolerance
approach to instances of bribery and corruption. The Board
insists on strict observance with these same standards by
its service providers in their activities for the Group.
Criminal Finances Act
The Board has a zero-tolerance commitment to preventing
persons associated with it from engaging in criminal
facilitation of tax evasion. The Board expects the same of its
service providers and will not work with service providers
that it knows do not demonstrate the same zero-tolerance
commitment to preventing persons associated with it from
engaging in criminal facilitation of tax evasion.
Environment, employees, human rights and
social matters
The Group has an investment management contract with the
Investment Manager. The Group has no employees and all of
its Directors are non-executive, with day-to-day activities
being carried out by third party service providers. There are
therefore no disclosures to be made in respect of its
employees. Further, because the Company and its Subsidiary
are closed-ended investment companies with no employees,
its environmental impact is minimal. The Board notes that the
companies in which the Group invests directly or indirectly
may have an environmental, employee, human rights or social
impact of which the Board has no visibility or control.
Strategic Report Governance Report Financial Statements Additional Information
51
Statement of Directors’ Responsibilities
Statement of Directors’
Responsibilities
The Directors are responsible for preparing the Annual
Report and consolidated financial statements in accordance
with applicable law and regulations.
The Companies Law requires the Directors to prepare
financial statements for each financial year. Under that law,
the Directors have elected to prepare the consolidated
financial statements in accordance with accounting principles
generally accepted in the United States of America and
applicable law.
Under the Companies Law, the Directors must not approve
the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group
and of its profit or loss for that period. In preparing these
consolidated financial statements, the Directors are
requiredto:
• Select suitable accounting policies and then apply them
consistently;
• Make judgements and estimates that are reasonable,
relevant and reliable;
• State whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the consolidated financial statements;
• Assess the Group’s and the Company’s ability to continue
as a going concern, disclosing, as applicable, matters
related to going concern; and
• Use the going concern basis of accounting unless
liquidation is imminent.
The Directors confirm that they have complied with the
above requirements in preparing the consolidated financial
statements.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy at any
time the financial position of the Company and of the Group
and enable them to ensure that its financial statements
comply with the Companies (Guernsey) Law, 2008. They are
responsible for such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets
of the Company and of the Group and to prevent and detect
fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website (https://www.rtwfunds.com/
rtw-biotech-opportunities-ltd). Legislation in Guernsey
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Responsibility Statement
The Directors who hold office at the date of approval of this
Director’s Report confirm that so far as they are aware, there
is no relevant audit information of which the Group’s auditor
is unaware, and that each Director has taken all the steps he
ought to have taken as a director to make himself or herself
aware of any relevant audit information and to establish that
the Group’s auditor is aware of that information.
We confirm that to the best of our knowledge:
• the consolidated financial statements, prepared in
accordance with US GAAP, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Group;
• the Strategic Report contained in the Annual Report
includes a fair review of the development and performance
of the business and the position of the Group together
with a description of the principal risks and uncertainties
that they face;
• the Annual Report and audited consolidated financial
statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Group’s performance, position,
business model and strategy; and
• the Annual Report and audited consolidated financial
statements includes information required by the FCA for
the purpose of ensuring that the Group complies with the
provisions of the Listing Rules and the Disclosure Guidance
and Transparency Rules of the FCA.
The responsibility statement was approved by the Board of
Directors on 27 March 2024 and was signed on behalf of
theBoard.
On behalf of the Board
William Simpson Paul Le Page
Chair Director
27 March 2024 27 March 20244
52
Directors’ Remuneration
Report
The Nomination and Remuneration Committee has been
established to consider the appointment and reappointment
of Directors and ensure that the Company maintains fair and
appropriate remuneration policies and controls. The
Nomination and Remuneration Committee comprises all the
independent Directors of the Company and is chaired by
William Scott.
The Company is not required to present a Directors’
Remuneration Report, and whilst this report does not
purport to meet all of the requirements of a typical listed UK
company’s Directors’ Remuneration Report, it has been
provided as the Directors believe that it may be useful to
users of this annual report and consolidated financial
statements.
The Group has no employees and hence no executive
directors. Directors do not have service contracts, but are
appointed under letters of appointment, copies of which are
available upon request from the Company Secretary and will
be available for inspection at the AGM.
Regarding nomination, the Nomination and Remuneration
Committee’s remit is to review regularly the structure, size
and composition of the Board, to give full consideration to
succession planning for Directors, to keep under review the
leadership needs of the Group and be responsible for
identifying and nominating for the approval of the Board
candidates to fill Board vacancies as and when they arise.
Board diversity
The Director’s biographies can be found on page 42 to 43.
Nospecific diversity parameters have been set as the Board
believes that all appointments should be made on merit and
taken in the context of skills, knowledge and experience
required for an effective Board. However, the Board is
cognisant of the FCA’s target to have 40% of board positions
held by women and notes that it currently only achieves 25%
female representation. Both gender and ethnic diversity
factors will be considered by the Board when making any
new appointments or replacing current Board members.
The future growth of the Board will be linked to the growth of
the Group’s shareholder base as the Board has been mindful
of the need to manage the Group’s fixed costs whilst it was
relatively small. The Board believes the current Board
members have the appropriate qualifications, experience
and expertise to manage the Group. However, following the
enlargement of the Group in 2024 with the Arix deal, the
Board considers that the Group could benefit from
the appointment of an additional Board member with the
appropriate skills, knowledge and experience, and has begun
the search for a new Director.
Tenure policy
Each Director retires at each AGM subsequent to his or her
appointment and is eligible for re-election by the shareholders
at such AGM.
A Director who retires at an AGM may, if willing to continue to
act, be elected or re-elected at that meeting. If, at a general
meeting at which a Director retires, the shareholders neither
re-elect that Director nor appoint another person to the
Board in their place, the retiring Director shall, if willing to
act, be deemed to have been re-elected unless at the general
meeting it is resolved not to fill the vacancy or unless a
resolution for the re-election of the Director is put to the
meeting and not passed.
In accordance with the AIC Code, if and when any Director
has been in office (or upon re-election would at the end of that
term, be in office) for more than nine years, or in the case of
the Chair ten years, the Company will consider whether there
is a risk that such Director might reasonably be deemed to
have lost independence through such long service.
The Chair, Mr Le Page and Ms Sirota have been members of
the Board since their appointment on 2 October 2019. Mr
Scott was appointed on 3 October 2019.
Termination policy
Should a Director not be re-elected by shareholders, or
retires from office under the Articles of Incorporation, the
appointment shall be terminated with immediate effect and
without compensation.
A Director may resign at any time by notice in writing to the
Board in accordance with the Articles of Incorporation.
The Company may terminate a Director’s appointment with
immediate effect should the Director have:
• Committed any serious breach or (after warning in writing)
any repeated or continued material breach of their
obligations to the Group; or
• Been guilty of any act of dishonesty, fraud or serious
misconduct or any conduct which (in the reasonable
opinion of the Board) tends to bring the Director or Group
into disrepute.
Succession policy
The Board gives full consideration to succession planning,
including the succession of the Chair and Directors, in the
course of its work, taking into account the challenges and
opportunities facing the Group, and what skills and expertise
are therefore needed on the Board in the future.
Biographies
of Directors
page 42
Strategic Report Governance Report Financial Statements Additional Information
53
.
Directors’ Remuneration Report
continued
In setting the level of each non-executive Director’s fee, the
Board had regard to: the time commitments expected; the
level of skill and experience of each Director; and the current
market and levels of companies of similar size and complexity.
Following this evaluation, the Board determined that the fees
set out in this remuneration policy were appropriate.
Under the terms of their appointments as non-executive
Directors, the Directors are entitled to the following annual
fees:
William Simpson GBP 50,000
Paul Le Page GBP 40,000
William Scott GBP 35,000
Stephanie Sirota US$42,000
All of the Directors are also entitled to be paid all reasonable
expenses properly incurred by them in attending general
meetings, Board or Committee meetings or otherwise in
connection with the performance of their duties. The Board
may determine that additional remuneration may be paid,
from time to time, to any one or more Directors in the event
such Director or Directors are requested by the Board to
perform extra or special services on behalf of the Group. The
Directors do not participate in any discussions relating to
their own fee, which is determined by the other Directors.
On termination of the appointment, Directors shall only be
entitled to such fees as may have accrued to the date of
termination, together with reimbursement in the normal way
of any expenses properly incurred prior to that date.
Overboarding policy
To ensure that each Director has sufficient time to meet
their responsibilities to the Group, the Board has adopted an
overboarding policy which outlines its expectations regarding
the time commitments of the Directors.
Should a Director wish to take on an additional external
directorship of a London listed, or equivalent, company, or is
anticipating a significant increase in time commitment of an
existing appointment, details must be provided to the Chair
(or, if the Chair is taking on the external directorship, the
Chair of the Audit Committee) for approval prior to accepting
the external directorship or additional time commitment.
The Director should:
• Confirm that the external directorship or change in time
commitment is not in conflict with the Group;
• Provide an estimate of the time commitment required;
• Confirm that they have sufficient surplus capacity to meet
their commitments to the Group; and
• Confirm that no commercial conflict of interest is likely
to arise or be perceived to arise.
To assist in the Chair’s decision, on an ongoing basis, at
each Board meeting, the Directors disclose their other
directorships at each quarterly meeting of the Company.
Remuneration policy
The Directors shall be remunerated at such a rate as the
Directors shall determine provided that the aggregate
amount of such fees shall not exceed US$500,000 per annum
(or the applicable currency equivalent thereof). The Board is
conscious that it needs to ensure that it has the right skills
and experience appointed to the Board to best support the
Group’s growth and its strategic plans and priorities over
coming years. The Board believes that the Fee Cap of
US$500,000 provides appropriate headroom to
accommodate any future market-based adjustments to
Directors’ fees and increases to the size and composition of
the Board and ensures that the Group maintains the ability
to pay competitive fees and attract and retain high calibre
Directors. The Board does not expect to utilise the full
amount of the proposed Fee Cap in the short to medium term
and has not to date made any changes to remuneration levels
of any Director. The Board benchmarks against comparable
investment companies to ensure that any future changes are
appropriate to remain in line with market levels.
54
Annual report on remuneration
Service contracts obligations and payment on loss of office
No Director has a service contract with the Group and, as such, no Director is entitled to compensation payments upon
termination of their appointment or loss of office.
Total remuneration paid to each Director
During the year ended 31 December 2023 the US Dollar equivalent of Directors’ remuneration that was paid was as follows:
31 December 2023
(US$)
31 December 2022
(US$)
William Simpson 62,121 53,889
Paul Le Page 49,697 43,111
William Scott 43,485 37,722
Stephanie Sirota 42,000 42,000
Total 197,303 176,722
All of the above remuneration relates to fixed annual fees. The remuneration of each of the Directors other than Ms Sirota is
fixed in Pounds Sterling (as set out in the table on page 54) and the US Dollar equivalent set out above may vary in accordance
with fluctuations in the Pounds Sterling/US Dollar exchange rate.
Directors are not eligible for bonuses, share options or long-term incentive schemes or other performance-related benefits.
There are no pension arrangements in place for the Directors of the Company. Accordingly, there were no other items in the
nature of remuneration, pension entitlements or incentive scheme arrangements which were paid or accrued to the Directors
during the year.
Directors’ shareholdings in the Company
Directors of the Company and their beneficial interests in the Company as at 31 December 2023 are detailed below:
Director
Number of Shares
% Holding
26 March
2024
% Holding
31 December
2023
% Holding
31 December
2022
26 March
2024
31 December
2023
31 December
2022
William Simpson 200,000 200,000 200,000 0.05% 0.09% 0.09%
Paul Le Page 128,000 128,000 128,000 0.03% 0.06% 0.06%
William Scott 400,000 350,000 305,003 0.10% 0.17% 0.14%
Stephanie Sirota 1,010,000 1,010,000 1,010,000 0.26% 0.48% 0.48%
On behalf of the Board
William Scott
Chair of the Nomination and Remuneration Committee
27 March 2024
Strategic Report Governance Report Financial Statements Additional Information
55
Report of the Audit Committee
I present the Audit Committee’s
report for financial year ended
31 December 2023, setting
forth the Audit Committee’s
structure, duties, and activities
during the reporting period.”
Paul Le Page
Independent
Non-Executive Director
Chair of the Audit Committee
Report of the
Audit Committee
Composition
The Audit Committee, chaired by Paul Le Page, operates
within clearly defined terms of reference which include all
matters indicated by DTR 7.1 and the AIC Code. Its other
members are William Simpson and William Scott. The Chair
of the Board is a member of the Audit Committee but does
not chair it. His membership of the Audit Committee is
considered appropriate due to: the lack of perceived conflict;
the small size of the Board; and because the Directors
consider that he acts in a non-executive capacity and
continues to be independent.
Only independent Directors can serve on the Audit
Committee, and members of the Audit Committee must have
no current links with the Group’s external auditor and must
be independent of the Investment Manager. The Audit
Committee can request the attendance of the Investment
Manager, the auditors or any service provider at its meetings.
Member Meetings attended
Paul Le Page
Independent Non-Executive Director
7/7
William Simpson
Chair and Independent
Non-Executive Director
7/7
William Scott
Independent Non-Executive Director
7/7
56
The Board has taken note of the requirement that at least
one member of the Audit Committee should have recent and
relevant financial experience and is satisfied that the Audit
Committee is properly constituted in that respect, with all
members being highly experienced and, in particular, one
member of the Committee is a chartered accountant.
The performance of the Chair of the Audit Committee is
reviewed on an annual basis and the membership of the Audit
Committee and its terms of reference are kept under regular
review.
Responsibilities
The Audit Committee is the formal forum through which the
external auditor reports to the Board of Directors. The
objectivity of the external auditor is reviewed by the Audit
Committee, which also reviews the terms under which the
external auditor is appointed to perform non-audit services
and the fees paid to the external auditor or their affiliated
firms overseas.
The main duties of the Audit Committee are:
• Giving full consideration and recommending to the Board
for approval of the contents of the Interim Report and
Annual Report and reviewing the external auditor’s report
thereon;
• Reviewing the scope, results, cost effectiveness,
independence and objectivity of the external auditor;
• Reviewing the draft valuations of the Group’s investments
prepared by the Investment Manager, and making a
recommendation to the Board on the valuation of the
Group’s investments;
• Reviewing and recommending to the Board for approval
of the audit, audit related and non-audit fees payable to
the external auditor and the terms of their engagement;
• Reviewing and approving the external auditor’s plan for
the annual audit and interim review;
• Reviewing the appropriateness of the Group’s accounting
policies;
• Ensuring the standards and adequacy of the service
providers’ control systems;
• Reviewing and considering the UK Code, the AIC Code
and the FRC Guidance on Audit Committees; and
• Reviewing the risks facing the Group and monitoring the
risk matrix.
The Audit Committee is required to report its findings to the
Board, identifying any matters on which it considers that
action or improvement is needed, and make
recommendations on the steps to be taken.
The external auditor is invited to attend the Audit Committee
meetings at which the Interim Reports and Annual Reports
are considered and at which they have the opportunity to
meet with the Audit Committee without representatives of
any other service provider or consultant being present at
least once a year.
Financial reporting
The primary role of the Audit Committee in relation to
financial reporting is to review with the Administrator,
Sub-Administrator, any external consultant as appointed
by the Investment Manager and the external auditor, the
appropriateness of the Interim Reports and Annual Reports,
concentrating on, amongst other matters:
• the quality and acceptability of accounting policies and
practices;
• the clarity of the disclosures and compliance with financial
reporting standards and relevant financial and governance
reporting requirements;
• material areas in which significant judgements have been
applied or there has been discussion with both any
external consultant as appointed by the Investment
Manager and the external auditor;
• whether the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Group’s
performance, business model and strategy; and
• any correspondence from regulators in relation to the
Group’s financial reporting.
To aid its review, the Audit Committee considers reports
from the Investment Manager and any external consultant as
appointed by the Investment Manager and also reports from
the external auditor on the outcomes of its interim review
and annual audit.
Meetings
The Audit Committee meets no less than twice a year in
Guernsey, at such other times as the Audit Committee Chair
shall require, and meets the external auditor at least once a
year in Guernsey. The Audit Committee met seven times in
the year ended 31 December 2023 (2022: five times).
The matters discussed at these meetings were:
• Review of the terms of reference of the Audit Committee
to confirm that they are appropriate to the business of the
Audit Committee and the current regulatory environment
in which the Group operates;
• Semi-annual reviews of the valuations of the Group’s
investments;
• Review of the accounting policies and format of the
consolidated financial statements;
• The relationship with the external auditor;
• Discussion and approval of the fee for the external audit;
• Discussion and review of the audit plan;
• Review and consideration of viability model;
• Review of compliance with the AIC Code of Corporate
Governance;
• Review of the related party register;
• Consideration of the requirement for an internal audit
function;
• Consideration of and recommendations to the Board
regarding the appointment of third-party service providers
and the adequacy of their arrangements; and
• Review of the Group’s key risks and internal controls.
Board
experiences
page 42
Directors’
responsibilities
page 52
Strategic Report Governance Report Financial Statements Additional Information
57
Report of the Audit Committee
continued
The Audit Committee worked with the Administrator and the
Investment Manager to structure a risk matrix for the Group,
which considered the controls applied by the Board, the
Investment Manager and key service providers. The matrix
has also been reviewed with the Investment Manager and
wasused to form the basis of the Company’s principal and
emerging risk disclosures in the Strategic Report on
pages 34 to 36.
Appointment of the external auditor
KPMG has been appointed as the statutory external auditor
of the Company since the Company re-domiciled from
Delaware to Guernsey on 2 October 2019. The Audit
Committee held meetings with KPMG before the start of the
audit to discuss formal planning and to discuss any possible
issues, along with the scope of the audit and appropriate
timetable. Informal meetings have also been held with the
Chair of the Audit Committee in order that the Chair is kept
up to date with the progress of the audit and formal reporting
requirement by the Audit Committee.
The objectivity of the external auditor is reviewed by the
Audit Committee, which also reviews the terms under which
the external auditor may be appointed to perform non-audit
services. The Audit Committee reviews the scope and results
of the audit, its cost effectiveness and the independence and
objectivity of the external auditor, with particular regard to
any non-audit work that the external auditor may undertake
and the level of fees associated to this non-audit work. In
order to safeguard external auditor independence and
objectivity, the Audit Committee ensures that audit related,
non-audit, or advisory services provided by the external
auditor do not conflict with its statutory audit responsibilities.
Audit related services will generally only cover reviews of
interim financial statements and capital raising work. Any
non-audit services conducted by the external auditor requires
the consent of the Audit Committee before being initiated.
The fees charged by KPMG to the Group during the last two
years were as follows:
2023 2022
Audit fee GBP 191,000 GBP 246,300
Review of interim financial
statements
GBP 50,300 GBP 46,575
Other non-audit services
(1)
GBP 82,800 –
Total GBP 324,100 GBP 292,875
(1) During the year ended 31 December 2023, KPMG charged fees
of GBP 82,800 in respect of its work on the Arix deal. These
services were preapproved by the Audit Committee and work
was performed by a separate team within KPMG from those
working on the Group’s audit.
The external auditor may not undertake any work for the
Company in respect of the following matters – preparation of
the financial statements, preparation of valuations used in
financial statements, provision of investment advice, taking
management decisions or advocacy work in adversarial
situations.
In addition, a KPMG member firm was paid EUR12,750 for the
audit of 4010 Royalty Offshore FNT Fund, LP.
Primary area of judgement
The Audit Committee determined that the key risk of
misstatement of the Group’s consolidated financial
statements related to the valuation of investment in
securities, at fair value, in the context of the judgements
necessary to evaluate current fair values.
As outlined in Note 2 to the consolidated financial statements of
the Group, the total carrying value of the Group’s investments in
securities at fair value as at 31 December 2023 was US$367.6
million (2022: US$350.1 million), of which US$123.9 million (2022:
US$85.9 million) related to private company investments.
Market quotations are available for those financial assets that
are listed and traded and have an active market quote.
For private company investments, the value of the Group’s
investments is based on the value of the relevant underlying
investee companies as determined by the Investment
Manager and approved by the Board. The valuation of the
Group’s private and restricted investments, the methodology
used for the year end valuation, and the constitution of the
Investment Manager’s Valuation Committee were discussed
with the Investment Manager and with the external auditor in
attendance at an Audit Committee meeting held on 6
February 2024, and the Independent Valuers, as appointed by
the Investment Manager, carry out valuations semi-annually
on the private company investments.
The Group values investment in private investment
companies using the net asset values provided by the
administrators of the private investment companies
concerned as a practical expedient. The Group applies the
practical expedient to its private investment companies on an
investment-by-investment basis and consistently with the
Group’s entire position in a particular investment, unless it is
probable that the Group will sell a portion of an investment at
an amount different from the NAV of the investment.
Please see Private Portfolio Valuations and Cash Runway
Analysis Information on page 20 for information on the
valuation of private company investments.
The Audit Committee has reviewed the valuation papers
prepared by the Investment Manager. The Investment
Manager confirmed to the Audit Committee that the
valuation methodology had been applied consistently during
the year. After reviewing the scope and results of the work of
the external auditor, the Audit Committee concluded that
they had not identified any material errors or inconsistencies.
The external auditor explained the results of its audit work on
the valuations, including its challenge of management’s
underlying projections, the economic assumptions, and prices
used. On the basis of its audit work, there were no material
adjustments proposed to those valuations as approved by the
Audit Committee.
Internal audit
The Audit Committee shall consider at least once a year
whether there is a need for an internal audit function.
Currently, the Audit Committee does not consider there to be
a need for an internal audit function, given that there are no
employees in the Group and all outsourced functions are with
parties who have their own internal controls and procedures.
58
The Audit Committee reviews the scope and results of the
audit, its cost effectiveness and the independence and
objectivity of the auditor, with particular regard to the level of
non-audit fees. The Audit Committee considers KPMG to be
independent of the Group and that the provision of such
non-audit services is not a threat to the objectivity and
independence of the conduct of the audit as appropriate
safeguards are in place.
To fulfil its responsibility regarding the independence of the
external auditor, the Audit Committee considered:
• audit personnel in the audit plan for the current year;
• a report from the external auditor describing its
arrangements to identify, report and manage any conflicts
of interest; and
• the extent of non-audit services provided by the external
auditor.
To assess the effectiveness of the external auditor, the Audit
Committee reviewed:
• the external auditor’s fulfilment of the agreed audit plan
and variations from it;
• reports highlighting the findings that arose during the
course of the audit; and
• feedback from the Investment Manager, Administrator,
Sub-Administrator, and any external consultant as
appointed by the Investment Manager in evaluating the
performance of the audit team.
The Audit Committee is satisfied with KPMG’s effectiveness
and independence as external auditor having considered the
degree of diligence and professional scepticism demonstrated
by them. Having carried out the review described above and
having satisfied itself that the external auditor remains
independent and effective, the Audit Committee has
recommended to the Board that KPMG be reappointed as
external auditor for the year ending 31 December 2024.
Annual Report
The Audit Committee members have each reviewed this
Annual Report and earlier drafts of it in detail, comparing its
content with their own knowledge of the Company, reporting
requirements and shareholder expectations. Formal meetings
of the Audit Committee have also reviewed the Annual Report
and its content and have received reports and explanations
from the Company’s service providers about the content and
the financial results. The Audit Committee has concluded that
the Annual Report, taken as a whole, is fair, balanced and
understandable, and that the Board can reasonably and with
justification approve the Statement of Directors’
Responsibilities on page 52.
Key activities of the Audit Committee
During the year, the Audit Committee worked with the
Investment Manager to simplify the Group’s financial
reporting and to provide enhanced disclosures on the Group’s
valuation procedures. The Committee was pleased to note
the implementation of a revised pricing model, which it had
requested for the Group’s audit, that shared the costs of
auditing commonly held positions across multiple RTW
entities. The Committee also reviewed the impact of a revised
fee structure that compensated the Group’s administrator
for the additional work associated with their oversight of the
Group’s financial reporting process. The Committee also
reviewed the reports prepared by KPMG’s corporate finance
team in connection with the issue of a new prospectus to
support the Arix acquisition. In addition to these activities, in
February 2024, the Committee held video conference calls
with the Group’s two valuation service providers during the
year end reporting process to satisfy itself on their
capabilities in the biotech sector.
On behalf of the Audit Committee,
Paul Le Page
Chair of the Audit Committee
27 March 2024
Strategic Report Governance Report Financial Statements Additional Information
59
03  CONSOLIDATED FINANCIAL STATEMENTS
61 Independent Auditor’s Report
65 Consolidated Statement of Assets
and Liabilities
66 Consolidated Condensed Schedule of
Investments
76 Consolidated Statement of Operations
77 Consolidated Statement of Changes
in Net Assets
79 Consolidated Statement of Cash Flows
80 Notes to the Consolidated Financial
Statements
Consolidated
Financial
Statements
60
Our opinion is unmodified
We have audited the consolidated financial statements of
RTW Biotech Opportunities Ltd (the “Company”) and its
subsidiary (together, the “Group”), which comprise the
consolidated statement of assets and liabilities including the
consolidated condensed schedule of investments as at 31
December 2023, the consolidated statements of operations,
changes in net assets and cash flows for the year then ended,
and notes, comprising significant accounting policies and
other explanatory information.
In our opinion, the accompanying
consolidated financial statements:
• give a true and fair view of the financial position of the
Group as at 31 December 2023, and of the Group’s financial
performance and cash flows for the year then ended;
• are prepared in accordance with U.S. generally accepted
accounting principles (“US GAAP”); and
• comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Independent Auditor’s Report to the
Members of RTW Biotech Opportunities Ltd
Our responsibilities are described below. We have fulfilled our
ethical responsibilities under, and are independent of the
Company and Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as required
by the Crown Dependencies’ Audit Rules and Guidance. We
believe that the audit evidence we have obtained is a sufficient
and appropriate basis for our opinion.
Key audit matters: our assessment
of the risks of material misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the
consolidated financial statements and include the most
significant assessed risks of material misstatement (whether
or not due to fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in
the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
In arriving at our audit opinion above, the key audit matter
was as follows (unchanged from 2022):
The risk Our response
Valuation of
investments in
securities, at fair value
$367,611,231; (2022:
$350,125,577)
Refer to the Report of
the Audit Committee
on pages 56 to 59, the
Consolidated
Condensed Schedule of
Investments as at 31
December 2023 on
pages 66 to 70, note 1
fair value significant
accounting policies and
note 2 fair value
measurements
disclosures.
Basis:
The Group’s investment portfolio
represents the most significant balance
on the consolidated statement of assets
and liabilities and is the principal driver of
the Group’s net asset value (2023: 86%;
2022: 101%). The investment portfolio is
composed of publicly quoted and private
unquoted life science investments
(together the “Investments”).
Publicly quoted life science investments,
representing 66.3% of the fair value of
Investments, are valued using third party
data sources.
Private unquoted life science investments,
representing 33.7% of the fair value of
Investments, are valued using recognised
valuation methodologies, including option
pricing models.
The Investment Manager utilises an
Independent Valuer to assist them in their
determination of the fair value of certain
private unquoted life science investments.
Risk:
The valuation of the Group’s Investments
is considered a significant area of our
audit, given that it represents the
majority of the net assets of the Group.
The valuation risk of the private unquoted
life science investments incorporates
both a risk of fraud and error given the
significance of the estimates and
judgements that are involved in the
determination of their fair value.
Our audit procedures included, but were not limited to:
Controls evaluation:
We assessed the design and implementation of the Investment Manager’s review control
in relation to the valuation of private unquoted life science investments.
Challenging managements’ Investments valuation, including the use of our KPMG
valuation specialists, as applicable:
Publicly quoted life science investments
For a value driven selection of the publicly quoted life science investments, we
independently priced to third party data sources.
Private unquoted life science investments
For a value driven selection of the private unquoted life science investments we
performed the following procedures, as applicable:
• Obtained and read the valuation memorandums produced by the Investment Manager;
• Assessed the objectivity, capabilities and competency of the Independent Valuer. We
considered the scope of their engagement and methodology applied by the Independent
Valuer in performing their work. We obtained and assessed their findings and
considered the impact, if any, on our audit work;
• Assessed the appropriateness of the valuation methodology used to estimate fair value;
• Agreed the price of investments acquired during the year to supporting documentation
such as purchase agreements, funding draw down requests and bank statements. We
performed public searches for contradictory or dis-confirming evidence to challenge
both the absence or appropriateness of fair value movements since acquisition;
• For those private unquoted life science investments valued using valuation models, such
as option pricing models, with the use of our own valuation specialists, we assessed and
challenged the key assumptions used by comparing them to available market
information and corroborated key inputs to supporting documentation;
• Considered market transactions in close proximity to the year-end and assessed their
appropriateness as being representative of fair value; and
• For private investment company life science investments we obtained independent
confirmation, from the administrator of those private investment companies, of the net
asset value per share and reconciled these to the net asset value used in the Group’s
valuation. Further we obtained the coterminous audited financial statements for those
private investment companies to corroborate the net asset value per share used. We
also evaluated the accounting framework and accounting policies applied and
considered the impact, if any, of the issued audit opinion therein.
Assessing disclosures:
We also considered whether the Group’s financial statement disclosures in relation to the
use of estimates and judgements regarding the fair value of investments in securities and
the Company’s investment valuation policies adopted and the fair value disclosures, in
notes 1 and 2 respectively, are in accordance with US GAAP.
61
Strategic Report Governance Report Financial Statements Additional Information
Independent Auditor’s Report to the Members of RTW Venture Fund Limited
continued
Our application of materiality and
an overview of the scope of our audit
Materiality for the consolidated financial statements as a
whole was set at $8.6m, determined with reference to a
benchmark of group net assets of $429.0m, of which it
represents approximately 2.0% (2022: 2.0%).
In line with our audit methodology, our procedures on
individual account balances and disclosures were performed
to a lower threshold, performance materiality, so as to reduce
to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a
material amount across the consolidated financial statements
as a whole. Performance materiality for the Group was set at
75% (2022: 75%) of materiality for the consolidated financial
statements as a whole, which equates to $6.4m. We applied
this percentage in our determination of performance
materiality because we did not identify any factors indicating
an elevated level of risk.
We reported to the Audit Committee any corrected or
uncorrected identified misstatements exceeding $0.43m, in
addition to other identified misstatements that warranted
reporting on qualitative grounds.
Our audit of the Group was undertaken to the materiality
level specified above, which has informed our identification of
significant risks of material misstatement and the associated
audit procedures performed in those areas as detailed above.
The group team performed the audit of the Group as if it was
a single aggregated set of financial information. The audit was
performed using the materiality level set out above and
covered 100% of total group revenue, total group profit
before tax, and total group assets and liabilities.
Going concern
The directors have prepared the consolidated financial
statements on the going concern basis as they do not intend
to liquidate the Group or the Company or to cease their
operations, and as they have concluded that the Group and
the Company’s financial position means that this is realistic.
They have also concluded that there are no material
uncertainties that could have cast significant doubt over their
ability to continue as a going concern for at least a year from
the date of approval of the consolidated financial statements
(the “going concern period”).
In our evaluation of the directors’ conclusions, we considered
the inherent risks to the Group and the Company’s business
model and analysed how those risks might affect the Group
and the Company’s financial resources or ability to continue
operations over the going concern period. The risks that we
considered most likely to affect the Group and the Company’s
financial resources or ability to continue operations over this
period was the availability of capital to meet operating costs
and other financial commitments.
We considered whether this risk could plausibly affect the
liquidity in the going concern period by comparing severe, but
plausible downside scenarios that could arise from this risk
against the level of available financial resources indicated by
the Company’s financial forecasts.
We considered whether the going concern disclosure in note 1
to the financial statements gives a full and accurate
description of the directors’ assessment of going concern.
Our conclusions based on this work:
• we consider that the directors’ use of the going concern
basis of accounting in the preparation of the consolidated
financial statements is appropriate;
• we have not identified, and concur with the directors’
assessment that there is not, a material uncertainty
related to events or conditions that, individually or
collectively, may cast significant doubt on the Group and
the Company’s ability to continue as a going concern for
the going concern period; and
• we have nothing material to add or draw attention to in
relation to the directors’ statement in the notes to the
consolidated financial statements on the use of the going
concern basis of accounting with no material uncertainties
that may cast significant doubt over the Group and the
Company’s use of that basis for the going concern period,
and that statement is materially consistent with the
consolidated financial statements and our audit knowledge.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the
time they were made, the above conclusions are not a
guarantee that the Group and the Company will continue in
operation.
Fraud and breaches of laws
and regulations – ability to detect
Identifying and responding to risks of material
misstatement due to fraud
To identify risks of material misstatement due to fraud
(“fraud risks”) we assessed events or conditions that could
indicate an incentive or pressure to commit fraud or provide
an opportunity to commit fraud. Our risk assessment
procedures included:
• enquiring of management as to the Group’s policies and
procedures to prevent and detect fraud as well as
enquiring whether management have knowledge of any
actual, suspected or alleged fraud;
• reading minutes of meetings of those charged with
governance; and
• using analytical procedures to identify any unusual or
unexpected relationships.
As required by auditing standards, and taking into account
possible incentives or pressures to misstate performance and
our overall knowledge of the control environment, we perform
procedures to address the risk of management override of
controls, in particular the risk that management may be in a
position to make inappropriate accounting entries, and the
risk of bias in accounting estimates such as valuation of
private unquoted life science investments. On this audit we do
not believe there is a fraud risk related to revenue recognition
because the Group’s revenue streams are simple in nature
with respect to accounting policy choice, and are easily
verifiable to external data sources or agreements with little
or no requirement for estimation from management. We did
not identify any additional fraud risks.
62
We performed procedures including:
• identifying journal entries and other adjustments to test
based on risk criteria and comparing any identified entries
to supporting documentation;
• incorporating an element of unpredictability in our audit
procedures; and
• assessing significant accounting estimates for bias
Further detail in respect of valuation of private unquoted life
science investments is set out in the key audit matter section
of this report.
Identifying and responding to risks of material
misstatement due to non-compliance with laws
andregulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the
consolidated financial statements from our sector experience
and through discussion with management (as required by
auditing standards), and from inspection of the Group’s
regulatory and legal correspondence, if any, and discussed
with management the policies and procedures regarding
compliance with laws and regulations. As the Group is
regulated, our assessment of risks involved gaining an
understanding of the control environment including the
entity’s procedures for complying with regulatory
requirements.
The Group is subject to laws and regulations that directly
affect the consolidated financial statements including financial
reporting legislation and taxation legislation and we assessed
the extent of compliance with these laws and regulations as
part of our procedures on the related financial statement
items.
The Group is subject to other laws and regulations where the
consequences of non-compliance could have a material effect
on amounts or disclosures in the consolidated financial
statements, for instance through the imposition of fines or
litigation or impacts on the Group and the Company’s ability
to operate. We identified financial services regulation as being
the area most likely to have such an effect, recognising the
regulated nature of the Group’s activities and its legal form.
Auditing standards limit the required audit procedures to
identify non-compliance with these laws and regulations to
enquiry of management and inspection of regulatory and legal
correspondence, if any. Therefore if a breach of operational
regulations is not disclosed to us or evident from relevant
correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some
material misstatements in the consolidated financial
statements, even though we have properly planned and
performed our audit in accordance with auditing standards.
For example, the further removed non-compliance with laws
and regulations is from the events and transactions reflected
in the consolidated financial statements, the less likely the
inherently limited procedures required by auditing standards
would identify it.
In addition, as with any audit, there remains a higher risk of
non-detection of fraud, as this may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to
detect material misstatement. We are not responsible for
preventing non-compliance or fraud and cannot be expected
to detect non-compliance with all laws and regulations.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the
annual report but does not include the consolidated financial
statements and our auditor’s report thereon. Our opinion on
the consolidated financial statements does not cover the
other information and we do not express an audit opinion or
any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit,
or otherwise appears to be materially misstated. If, based on
the work we have performed, we conclude that there is a
material misstatement of this other information, we are
required to report that fact. We have nothing to report in this
regard.
Disclosures of emerging and principal
risks and longer term viability
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
disclosures in respect of emerging and principal risks and the
viability statement, and the consolidated financial statements
and our audit knowledge. we have nothing material to add or
draw attention to in relation to:
• the directors’ confirmation within the Longer Term
Viability Statement (page 37) that they have carried out a
robust assessment of the emerging and principal risks
facing the Group, including those that would threaten its
business model, future performance, solvency or liquidity;
• the emerging and principal risks disclosures describing
these risks and explaining how they are being managed or
mitigated;
• the directors’ explanation in the Longer Term Viability
Statement (page 37) as to how they have assessed the
prospects of the Group, over what period they have done
so and why they consider that period to be appropriate,
and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the
period of their assessment, including any related
disclosures drawing attention to any necessary
qualifications or assumptions.
We are also required to review the Longer Term Viability
Statement, set out on page 37 under the Listing Rules. Based
on the above procedures, we have concluded that the above
disclosures are materially consistent with the consolidated
financial statements and our audit knowledge.
63
Strategic Report Governance Report Financial Statements Additional Information
Independent Auditor’s Report to the Members of RTW Venture Fund Limited
continued
Corporate governance disclosures
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
corporate governance disclosures and the consolidated
financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of
the following is materially consistent with the consolidated
financial statements and our audit knowledge:
• the directors’ statement that they consider that the
annual report and consolidated financial statements taken
as a whole is fair, balanced and understandable, and
provides the information necessary for shareholders to
assess the Company’s position and performance, business
model and strategy;
• the section of the annual report describing the work of the
Audit Committee, including the significant issues that the
audit committee considered in relation to the financial
statements, and how these issues were addressed; and
• the section of the annual report that describes the review
of the effectiveness of the Company’s risk management
and internal control systems.
We are required to review the part of Corporate Governance
Statement relating to the Company’s compliance with the
provisions of the UK Corporate Governance Code specified by
the Listing Rules for our review. We have nothing to report in
this respect.
We have nothing to report on other matters on which we
are required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to
report to you if, in our opinion:
• the Company has not kept proper accounting records; or
• the consolidated financial statements are not in agreement
with the accounting records; or
• we have not received all the information and explanations,
which to the best of our knowledge and belief are
necessary for the purpose of our audit.
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 52,
the directors are responsible for: the preparation of the
consolidated financial statements including being satisfied
that they give a true and fair view; such internal control as
they determine is necessary to enable the preparation of
consolidated financial statements that are free from material
misstatement, whether due to fraud or error; assessing the
Group and Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and using the going concern basis of accounting unless
liquidation is imminent.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or
error, and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of assurance, but does
not guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of
users taken on the basis of the consolidated financial
statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and restrictions on its use by
persons other than the Company’s members as a body
This report is made solely to the Company’s members, as a
body, in accordance with section 262 of the Companies
(Guernsey) Law, 2008. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s
members, as a body, for our audit work, for this report, or for
the opinions we have formed.
Dermot Dempsey
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
27 March 2024
64
2023 2022
ASSETS:
Investments in securities, at fair value (cost at 31 December 2023: $244,056,637; 31 December 2022: $259,472,596) 367,611,231 350,125,577
Derivative contracts, at fair value (cost at 31 December 2023: $6,271,193; 31 December 2022: $2,614,659) 15,463,820 21,467,649
Cash and cash equivalents 2,721,553 6,966,168
Due from brokers 57,887,214 22,195,456
Receivable from unsettled trades – 439,798
Other assets 2,550,609 345,750
TOTAL ASSETS 446,234,427 401,540,398
LIABILITIES:
Securities sold short, at fair value (proceeds at 31 December 2023: $1,399,242; 31 December 2022: $15,407,927) 1,197,921 12,438,334
Derivative contracts, at fair value (proceeds at 31 December 2023: $nil; 31 December 2022: $nil) 8,390,327 8,926,743
Due to brokers 5,329,681 25,823,016
Payable for unsettled trades – 5,561,560
Accrued expenses 2,293,541 866,756
TOTAL LIABILITIES 17,211,470 53,616,409
TOTAL NET ASSETS 429,022,957 347,923,989
NET ASSETS attributable to Ordinary Shares (31 December 2023: 210,635,347;
31 December 2022: 212,389,138) 399,283,811 326,079,521
NET ASSETS attributable to Non-Controlling Interest 29,739,146 21,844,468
NAV per Ordinary Share 1.8956 1.5353
The audited consolidated financial statements of the Group were approved and authorised for issue by the Board of Directors on 27 March 2024 and
signed on its behalf by:
William Simpson Paul Le Page
Chair Director
See accompanying notes to the consolidated financial statements.
Consolidated Statement of Assets and Liabilities
as at 31 December 2023 and 31 December 2022
(Expressed in United States Dollars)
65
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Descriptions Number of Shares Cost Fair Value
Percentage
of Net Assets
Investments in securities, at fair value
Common stocks
United States
Healthcare
Rocket Pharmaceuticals, Inc. 2,400,755 8,188,796 71,950,627 16.77
Others* 87,817,542 121,224,790 28.26
Total United States 96,006,338 193,175,417 45.03
Netherlands
Healthcare 5,570,915 6,878,343 1.60
Ireland
Healthcare 6,090,973 3,974,203 0.93
China
Healthcare
Ji Xing Pharmaceuticals Ltd. 541,205 216,482 798,382 0.19
Others* 402,213 677,342 0.16
Total China 618,695 1,475,724 0.35
Canada
Healthcare 2,953,012 646,323 0.15
British Virgin Islands
Healthcare 776,929 477,179 0.11
Cayman Islands
Financials 46,790 51,001 0.01
Total common stocks 112,063,652 206,678,190 48.18
Convertible preferred stocks
China
Healthcare
Ji Xing Pharmaceuticals Ltd. 14,177,776 25,664,114 33,052,656 7.70
Others* 4,110,584 4,168,056 0.97
Total China 29,774,698 37,220,712 8.67
United States
Healthcare* 40,654,612 36,321,860 8.47
Ireland
Healthcare 1,093,042 1,854,238 0.43
* No individual investment security or contract constitutes greater than 5 per cent of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments
as at 31 December 2023
(Expressed in United States Dollars)
66
Descriptions
Number
of Shares Cost Fair Value
Percentage
of Net Assets
Investments in securities, at fair value (continued)
Convertible preferred stocks
Switzerland
Healthcare 1,729,518 1,723,249 0.40
United Kingdom
Healthcare 774,317 760,071 0.18
Total convertible preferred stocks 74,026,187 77,880,130 18.15
Investment in private investment companies
Cayman Islands
Healthcare
4010 Royalty Offshore FNT Fund, LP 23,892,852 25,982,258 6.06
Ireland
Healthcare 11,814,933 15,873,635 3.70
Total investment in private investment companies 35,707,785 41,855,893 9.76
American depository receipts
United Kingdom
Healthcare
Immunocore Holdings plc 462,249 11,872,691 31,580,852 7.36
Netherlands
Healthcare 1,331,626 1,434,221 0.33
Ireland
Healthcare 161,953 198,555 0.05
Total American depository receipts 13,366,270 33,213,628 7.74
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2023
(Expressed in United States Dollars)
67
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Descriptions Number of Shares Cost Fair Value
Percentage
of Net Assets
Investments in securities, at fair value (continued)
Convertible notes
Canada
Healthcare 7,512,664 7,566,259 1.76
United States
Healthcare 1,380,079 417,131 0.10
Total convertible notes 8,892,743 7,983,390 1.86
Total investments in securities, at fair value 244,056,637 367,611,231 85.69
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2023
(Expressed in United States Dollars)
68
Descriptions
Number of
contracts Cost Fair Value
Percentage
of Net Assets
Derivative contracts – assets, at fair value
Equity swaps
United States
Healthcare 7,185,030 1.67
United Kingdom
Healthcare
Immunocore Holdings plc 12,498 280,979 0.07
British Virgin Islands
Healthcare 9,793 0.00
Total equity swaps 7,475,802 1.74
Warrants
United States
Healthcare
Rocket Pharmaceuticals, Inc. 170,764 2,565,561 4,800,495 1.12
Others* 1,242,926 1,764,580 0.41
Total United States 3,808,487 6,565,075 1.53
Canada
Healthcare 2,462,706 881,237 0.21
Total warrants 6,271,193 7,446,312 1.74
Contingent value rights
United States
Healthcare 541,706 0.13
Total contingent value rights 541,706 0.13
Total derivative contracts – assets, at fair value 6,271,193 15,463,820 3.61
* No individual investment security or contract constitutes greater than 5 per cent of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2023
(Expressed in United States Dollars)
69
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Descriptions Proceeds Fair Value
Percentage
of Net Assets
Securities sold short, at fair value
Common stocks
United States
Healthcare 1,353,107 1,146,920 0.28
Cayman Islands
Financials 46,135 51,001 0.01
Total common stocks 1,399,242 1,197,921 0.29
Total securities sold short, at fair value 1,399,242 1,197,921 0.29
Descriptions Fair Value
Percentage
of Net Assets
Derivative contracts – liabilities, at fair value
Equity swaps
United States
Healthcare 8,390,327 1.96
Total United States 8,390,327 1.96
Total derivative contracts – liabilities, at fair value 8,390,327 1.96
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2023
(Expressed in United States Dollars)
70
Descriptions Number of Shares Cost Fair Value
Percentage
of Net Assets
Investments in securities, at fair value
Common stocks
United States
Healthcare
Prometheus Biosciences, Inc. 670,916 6,802,058 52,946,904 15.22
Rocket Pharmaceuticals, Inc. 2,400,755 8,188,796 46,982,775 13.50
Others* 124,096,539 118,157,365 33.96
Total United States 139,087,393 218,087,044 62.68
Netherlands
Healthcare 4,368,486 5,345,551 1.54
Ireland
Healthcare 4,099,988 2,981,309 0.86
Canada
Healthcare 3,275,323 1,012,216 0.29
British Virgin Islands
Healthcare 547,564 997,552 0.29
China
Healthcare
Ji Xing Pharmaceuticals Ltd. 541,205 216,482 600,738 0.17
Cayman Islands
Financials 254,581 257,459 0.07
Healthcare 188,880 194,370 0.06
Total Cayman Islands 443,461 451,829 0.13
Bermuda
Healthcare 260,330 208,004 0.06
Belgium
Healthcare 165,629 32,919 0.01
Total common stocks 152,464,656 229,717,162 66.03
* No individual investment security or contract constitutes greater than 5 per cent of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments
as at 31 December 2022
(Expressed in United States Dollars)
71
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Descriptions
Number
of Shares Cost Fair Value
Percentage
of Net Assets
Investments in securities, at fair value (continued)
Convertible preferred stocks
United States
Healthcare* 44,011,844 38,108,351 10.95
China
Healthcare
Ji Xing Pharmaceuticals Ltd. 10,599,945 14,824,185 16,433,316 4.73
Others* 1,771,209 1,622,898 0.47
Total China 16,595,394 18,056,214 5.20
Switzerland
Healthcare 1,729,518 1,768,384 0.51
Ireland
Healthcare 116,545 117,696 0.03
Total convertible preferred stocks 62,453,301 58,050,645 16.69
American depository receipts
United Kingdom
Healthcare
Immunocore Holdings plc 453,985 11,440,789 25,908,924 7.45
Others* 1,064,820 813,170 0.23
Total United Kingdom 12,505,609 26,722,094 7.68
Netherlands
Healthcare 8,996,563 9,918,906 2.85
Ireland
Healthcare 893,338 961,567 0.28
Sweden
Healthcare 339,248 528,539 0.15
Israel
Healthcare 372,743 98,985 0.03
Total American depository receipts 23,107,501 38,230,091 10.99
* No individual investment security or contract constitutes greater than 5 per cent of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2022
(Expressed in United States Dollars)
72
Descriptions Number of Shares Cost Fair Value
Percentage
of Net Assets
Investments in securities, at fair value (continued)
Investment in private investment companies
Ireland
Healthcare 11,814,933 14,074,846 4.04
Total investment in private investment companies 11,814,933 14,074,846 4.04
Convertible notes
China
Healthcare
Ji Xing Pharmaceuticals Ltd. 762,474 7,624,737 8,191,552 2.35
United States
Healthcare 2,007,468 1,861,281 0.53
Total convertible notes 9,632,205 10,052,833 2.88
Total investments in securities, at fair value 259,472,596 350,125,577 100.63
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2022
(Expressed in United States Dollars)
73
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Descriptions Cost Fair Value
Percentage
of Net Assets
Derivative contracts – assets, at fair value
Equity swaps
United States
Healthcare 16,781,963 4.83
British Virgin Islands
Healthcare 2,097,803 0.60
Ireland
Healthcare 206,563 0.06
Total equity swaps 19,086,329 5.49
Warrants
Canada
Healthcare 1,939,543 1,858,925 0.53
United States
Healthcare 674,517 522,337 0.15
Cayman Islands
Financials 599 58 0.00
Total warrants 2,614,659 2,381,320 0.68
Total derivative contracts – assets, at fair value 2,614,659 21,467,649 6.17
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2022
(Expressed in United States Dollars)
74
Descriptions Proceeds Fair Value
Percentage
of Net Assets
Securities sold short, at fair value
Common stocks
United States
Healthcare 14,521,155 11,500,094 3.31
Netherlands
Healthcare 293,711 221,800 0.06
Cayman Islands
Financials 96,480 98,829 0.03
Healthcare 46,260 89,072 0.03
Total Cayman Islands 142,740 187,901 0.06
Total common stocks 14,957,606 11,909,795 3.43
American depository receipts
Sweden
Healthcare 450,321 528,539 0.15
Total American depository receipts 450,321 528,539 0.15
Total securities sold short, at fair value 15,407,927 12,438,334 3.58
Descriptions Fair Value
Percentage
of Net Assets
Derivative contracts – liabilities, at fair value
Equity swaps
United States
Healthcare 7,041,281 2.02
Index 1,860,052 0.54
Total United States 8,901,333 2.56
Israel
Healthcare 25,410 0.01
Total derivative contracts – liabilities, at fair value 8,926,743 2.57
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2022
(Expressed in United States Dollars)
75
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
2023 2022
Investment income
Interest (net of withholding taxes of $nil; 31 December 2022: $nil) 2,419,117 635,860
Dividends (net of withholding taxes of $2,537; 31 December 2022: $123,149) 571,473 332,103
Other 1,179,964 1,199,296
Total investment income 4,170,554 2,167,259
Expenses
Management fees 4,269,757 3,751,464
Interest 1,560,429 779,988
Professional fees 749,328 1,008,629
Administrative fees 673,422 312,003
Research costs 474,511 742,738
Audit fees 341,500 329,557
Directors’ fees 177,011 176,722
Other expenses 687,805 357,429
Total expenses 8,933,763 7,458,530
Net investment income/(loss) (4,763,209) (5,291,271)
Realised and change in unrealised gain/(loss) on investments, derivatives and foreign currency transactions
Net realised gain/(loss) on securities and foreign currency transactions 69,546,080 8,357,014
Net change in unrealised gain/(loss) on securities and foreign currency translation 29,962,442 (44,355,779)
Net realised gain/(loss) on derivative contracts (2,428,987) (2,748,269)
Net change in unrealised gain/(loss) on derivative contracts (9,123,947) 4,601,568
Net realised and unrealised gain/(loss) on investments, derivatives and foreign currency transactions 87,955,588 (34,145,466)
Net increase/(decrease) in net assets resulting from operations 83,192,379 (39,436,737)
See accompanying notes to the consolidated financial statements.
Consolidated Statement of Operations
For the year ended 31 December 2023 and 31 December 2022
(Expressed in United States Dollars)
76
Ordinary Share
Class
Non-Controlling
Interest
Net assets, beginning of year 326,079,521 21,844,468
Operations
Net investment income/(loss) (4,763,209) –
Net realised gain/(loss) on securities and foreign currency transactions 69,546,080 –
Net change in unrealised gain/(loss) on securities and foreign currency translation 29,962,442 –
Net realised gain/(loss) on derivative contracts (2,428,987) –
Net change in unrealised gain/(loss) on derivative contracts (9,123,947) –
Income/(loss) attributable to Non-Controlling Interest (7,894,678) 7,894,678
Net change in net assets resulting from operations 75,297,701 7,894,678
Share buyback (Gross of $4,178 transaction costs; 31 December 2022: $nil) (Note 9) (2,093,411) –
Net assets, end of year 399,283,811 29,739,146
See accompanying notes to the consolidated financial statements.
Consolidated Statement of Changes in Net Assets
For the year ended 31 December 2023
(Expressed in United States Dollars)
77
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Ordinary Share
Class
Performance
Allocation Share
Class
Tota l
Shareholders’
Funds
Non-Controlling
Interest
Net assets, beginning of year 363,040,222 24,320,504 387,360,726 –
Operations
Net investment income/(loss) (5,291,271) – (5,291,271) –
Net realised gain/(loss) on securities and foreign currency transactions 8,357,014 – 8,357,014 –
Net change in unrealised gain/(loss) on securities and foreign currency translation (44,355,779) – (44,355,779) –
Net realised gain/(loss) on derivative contracts (2,748,269) – (2,748,269) –
Net change in unrealised gain/(loss) on derivative contracts 4,601,568 – 4,601,568 –
Performance Allocation 4,359,551 (4,359,551) – –
Income/(loss) attributable to Non-Controlling Interest (1,883,515) – (1,883,515) 1,883,515
Net change in net assets resulting from operations (36,960,701) (4,359,551) (41,320,252) 1,883,515
Capital transactions
In-kind transfer – (19,960,953) (19,960,953) 19,960,953
Net change in net assets resulting from capital transactions – (19,960,953) (19,960,953) 19,960,953
Net change in net assets (36,960,701) (24,320,504) (61,281,205) 21,844,468
Net assets, end of year 326,079,521 – 326,079,521 21,844,468
See accompanying notes to the consolidated financial statements.
Consolidated Statement of Changes in Net Assets
For the year ended 31 December 2022
(Expressed in United States Dollars)
78
2023 2022
Cash flows from operating activities
Net increase/(decrease) in net assets resulting from operations 83,192,379 (39,436,737)
Adjustments to reconcile net change in net assets resulting from operations to net cash provided by/(used in)
operating activities:
Net realised (gain)/loss on securities and foreign currency transactions (69,546,080) (8,357,014)
Net change in unrealised (gain)/loss on securities and foreign currency translation (29,962,442) 44,355,779
Net realised (gain)/loss on derivative contracts 2,428,987 2,748,269
Net change in unrealised (gain)/loss on derivative contracts 9,123,947 (4,601,568)
Effect of exchange rate changes on cash and cash equivalents (80,371) 149,875
Purchases of investments in securities (147,986,641) (116,361,329)
Proceeds from sales of investments in securities 203,554,346 127,814,762
Proceeds from securities sold short 27,233,184 27,488,465
Payments for securities sold short (11,938,063) (12,916,667)
Proceeds from derivative contracts 15,512,690 1,971,402
Payments for derivative contracts (21,598,211) (4,986,268)
Changes in operating assets and liabilities:
Other assets (2,204,859) (154,185)
(Receivable from)/payable for unsettled trades (5,121,762) 4,830,450
Due to brokers (20,493,335) (12,196,843)
Accrued expenses 1,426,785 5,211
Net cash provided by/(used in) operating activities 33,540,554 10,353,602
Cash flows from financing activities
Share buyback (2,093,411) –
Net cash provided by/(used in) financing activities (2,093,411) –
Net change in cash and cash equivalents 31,447,143 10,353,602
Cash, cash equivalents, and restricted cash, beginning of the year 29,161,624 18,808,022
Cash, cash equivalents, and restricted cash, end of the year 60,608,767 29,161,624
At 31 December, the amounts categorised in cash, cash equivalents, and restricted cash include the following:
Cash and cash equivalents 2,721,553 6,966,168
Due from brokers 57,887,214 22,195,456
Tot a l 60,608,767 29,161,624
Supplemental disclosure of cash flow information
Cash paid during the year for interest 1,620,709 724,317
See accompanying notes to the consolidated financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2023 and 31 December 2022
(Expressed in United States Dollars)
79
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
1. Nature of operations and summary of significant accounting policies
>RTW Biotech Opportunities Ltd, formerly known as RTW Venture Fund Limited (the “Company”), is a publicly listed Guernsey non-cellular company
limited by shares. The Company was originally incorporated in the State of Delaware, United States of America, and re-domiciled into Guernsey under
the Companies Law on 2 October 2019 with registration number 66847 on the Guernsey Register of Companies. On 30 October 2019, all of the issued
Ordinary Shares of the Company were listed and admitted to trading on the Specialist Fund Segment of the London Stock Exchange under the ticker
symbol: RTW. Subsequently, on 6 August 2021, the Company’s Ordinary Shares were admitted to trading on the Premium Segment of the London
Stock Exchange with the additional ticker symbol: RTWG denoting the Sterling price. The original ticker, RTW, continues to denote the US Dollar price.
On 22 June 2023, the Company changed its name from “RTW Venture Fund Limited” to “RTW Biotech Opportunities Ltd.”
In 2022, the Company has transferred its right to the profits and losses attributable to the Group’s portfolio of assets to its wholly owned subsidiary,
RTW Biotech Opportunities Operating Ltd (the “Subsidiary”). All the income and expenses of the Subsidiary are consolidated with the income and
expenses of the Group. On 14 July 2023, the Subsidiary changed its name from “RTW Venture Fund Operating Limited” to “RTW Biotech
Opportunities Operating Ltd”.
The Group seeks to use equity capital (from the net proceeds of any share issuance or, where appropriate, from the net proceeds of investment
divestments or other related profits) to provide seed and additional growth capital to the private investments. To mitigate cash-drag, the uninvested
portion is invested across public stocks largely replicating the public stock portfolios of RTW’s existing US-based funds. The Group focuses on
creating, building, and supporting world-class life sciences, biopharmaceutical and medical technology companies. The Group’s investment objective is
to generate attractive risk-adjusted returns through investments in securities, both equity and debt, long and short, of companies with a focus on the
pharmaceutical sector.
Pursuant to an investment management agreement, the Group is managed by RTW Investments, LP, a Delaware limited partnership, to provide the
Group with discretionary portfolio management, risk management services and certain other services. The Investment Manager is an investment
adviser registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940.
Basis of presentation
The consolidated financial statements are expressed in United States Dollars. The consolidated financial statements which give a true and fair view
and have been prepared in accordance with US generally accepted accounting principles (“US GAAP”) and are in compliance with the Companies
(Guernsey) Law, 2008. The entities comprised within the Group are investment companies and follow the accounting and reporting guidance in
Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification Topic 946, Financial Services – Investment Companies.
The Directors consider that it is appropriate to adopt a going concern basis of accounting in preparing the consolidated financial statements. In
reaching this assessment, the Directors have considered a wide range of information relating to present and future conditions including the balance
sheets, future projections, cash flows and the longer-term strategy of the business.
Principles of consolidation
The consolidated financial statements include accounts of the Company consolidated with the accounts of the Subsidiary. All inter-group balances
have been eliminated upon consolidation. The Subsidiary is incorporated in Guernsey.
Non-Controlling Interest
An affiliate of the Investment Manager, RTW Venture Performance LLC, holds an interest in the Subsidiary. The Non-Controlling Interest captures
both Performance Allocation and mark to market movements on the New Performance Allocation Share held by RTW Venture Performance LLC in
the Subsidiary. For the year ended 31 December 2023, $5,137,836 of the income attributable to the Non-Controlling Interest was comprised of mark to
market movements of Notional Ordinary Shares (31 December 2022: $1,883,515), with $2,756,842 of the income related to an allocation of
uncrystallized performance allocation from Ordinary Shareholders to the Performance Allocation Share Class (31 December 2022: $nil).
Cash, cash equivalents, and restricted cash
Cash represents cash deposits held at financial institutions. Cash equivalents include short-term highly liquid investments of sufficient credit quality
that are readily convertible to known amounts of cash and have original maturities of three months or less. Cash equivalents are carried at cost plus
accrued interest, which approximates fair value. Cash equivalents are held for the purpose of meeting short-term liquidity requirements, rather than
for investment purposes. As at 31 December 2023 and 31 December 2022, the Group had no cash equivalents.
Restricted cash is subject to a legal or contractual restriction by third parties as well as a restriction as to withdrawal or use, including restrictions
that require the funds to be used for a specified purpose and restrictions that limit the purpose for which the funds can be used. The Group considers
cash pledged as collateral for securities sold short, cash collateral posted with counterparties for derivative contracts and further amounts due from
brokers to be restricted cash, as outlined in Note 3.
Fair value – definition and hierarchy
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the ‘exit price’) in an orderly transaction
between market participants at the measurement date.
In determining fair value, the Group uses various valuation techniques. A fair value hierarchy for inputs is used in measuring fair value that maximizes
the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs are to be used when available.
Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources
independent of the Group.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2023
(Expressed in United States Dollars)
80
1. Nature of operations and summary of significant accounting policies (continued)
Fair value – definition and hierarchy (continued)
Unobservable inputs reflect the Group’s assumptions about the inputs market participants would use in pricing the asset or liability based on the best
information available in the circumstances. The fair value hierarchy is categorised into three levels based on the inputs as follows:
Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Group has the ability to access.
Valuation adjustments are not applied to Level 1 investments. Since valuations are based on quoted prices that are readily and regularly available in an
active market, valuation of these investments does not entail a significant degree of judgement.
Level 2 – Valuations based on inputs, other than quoted prices included in Level 1, that are observable, either directly or indirectly.
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Investments in private investment companies measured using net asset value as a practical expedient are not categorised in the fair value hierarchy.
The availability of valuation techniques and observable inputs can vary from investment to investment and is affected by a wide variety of factors,
including the type of investment, whether the investment is new and not yet established in the marketplace, and other characteristics particular to
the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgement. Those estimated values do not necessarily represent the amounts that may be ultimately realised due to the
occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values
may be materially higher or lower than the values that would have been used had a ready market for the investments existed. Accordingly, the degree
of judgement exercised by the Group in determining fair value is greatest for investments categorised in Level 3. In certain cases, the inputs used to
measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy
within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value
measurement.
Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even
when market assumptions are not readily available, the Group’s own assumptions are set to reflect those that market participants would use in pricing
the asset or liability at the measurement date. The Group uses prices and inputs that are current as of the measurement date, including periods of
market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many investments. This condition could
cause an investment to be reclassified to a lower level within the fair value hierarchy.
Fair value – valuation techniques and inputs
Investments in securities and securities sold short
Listed investments
The Group values investments in securities including exchange traded funds and securities sold short that are freely tradable and are listed on a
national securities exchange or reported on the NASDAQ national market at their closing sales price as of the valuation date. To the extent these
securities are actively traded and valuation adjustments are not applied, they are categorised in Level 1 of the fair value hierarchy. Securities traded on
inactive markets or valued by reference to similar instruments or where a discount may be applied are categorised in Level 2 or 3 of the fair value
hierarchy.
Unlisted investments
Unlisted investments are valued at fair value by the Directors following a detailed review and appropriate challenge of the valuations proposed by the
Investment Manager. As part of their valuation process, the Investment Manager engages Independent Valuers to challenge their assessed fair value
on certain unlisted investments. The Investment Manager’s unlisted investment valuation policy applies techniques consistent with the IPEV
Guidelines.
The valuation techniques applied are either a market-based approach, an income approach such as discounted cash flows, or where available, a net
asset value practical expedient approach. A combination of the valuation techniques mentioned may also be utilised. The IPEV Guidelines recognise
that the price of a recent transaction, if resulting from an orderly transaction, generally represents fair value as at the transaction date and may be an
appropriate starting point for estimating fair value at subsequent measurement dates. Consideration is given to the facts and circumstances as at the
subsequent measurement date including changes in the market and/or performance of the investee company. Milestone analysis is used where
appropriate to incorporate operational progress at the investee company level. In addition, a trigger event such as a subsequent round of financing by
the investee company would influence the market technique used to calibrate fair value at the measurement date. Where appropriate, a probability-
weighted expected return method (“PWERM”) may be employed when different potential outcomes (e.g. IPO, round of financing, stay private,
dissolution, etc.) are utilised to derive the value of investments held.
The market approach utilises guideline public companies relying on projected revenues to derive an indicative enterprise value. Due to the nature of
the investments, being in the early stages of development, the projected revenues are used as a proxy for stable state revenue. A selected multiple is
then applied based on the observed market multiples of the guideline public companies. To reflect the risk associated with the achievement of the
projected revenues and the early development stage of each of the investments, the indicative enterprise value is discounted at an appropriate rate.
81
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2023
(Expressed in United States Dollars)
1. Nature of operations and summary of significant accounting policies (continued)
Fair value – valuation techniques and inputs (continued)
Investments in securities and securities sold short (continued)
Unlisted investments (continued)
The income approach utilises the discounted cash flow method. Projected cash flows for each investment are discounted to determine an assumed
enterprise value.
Where applicable, the indicative enterprise value has been determined using a back-solve model based on the pricing of the most recent round of
financing. The internal rate of return for each investment is compared to the selected venture capital rate applied in the market approach to assess
the reasonableness of the indicated value implied by each financing round. The derived enterprise value is allocated to the equity class on either a fully
diluted basis or using an option pricing model. The resulting indicative value on a per share basis is then multiplied by the number of shares to derive
the fair market value.
American depository receipts
The Group values investments in American depositary receipts that are freely tradable and are listed on a national securities exchange or reported
on the NASDAQ national market at their last reported sales price as of the valuation date. These investments are categorised in Level 1 of the fair
value hierarchy.
Convertible bonds
Convertible bonds are recorded at fair value using valuation techniques based on observable inputs. These instruments are generally categorised
in Level 2 of the fair value hierarchy. In instances where significant inputs are unobservable, convertible bonds are categorised in Level 3 of the fair
value hierarchy.
Convertible notes
The Group values investments in convertible notes in accordance with the unlisted investments section above. As of 31 December 2023, these
investments are all categorised in Level 3 of the fair value hierarchy.
Convertible preferred stock
The Group values Level 1 investments in convertible preferred stock that are listed on a national securities exchange at their closing sales price as of
the valuation date. Level 3 investments in convertible preferred stock are valued in accordance with the unlisted investments section above. As of 31
December 2023, these investments are categorised in Level 1 and Level 3 of the fair value hierarchy.
Investment in private investment companies
The Group values investment in private investment companies using the net asset values provided by the underlying private investment companies as
a practical expedient. The Group applies the practical expedient to its private investment companies on an investment-by-investment basis and
consistently with the Group’s entire position in a particular investment, unless it is probable that the Group will sell a portion of an investment at an
amount different from the net asset value of the investment.
Private investment in public equity
Private investment in public equity (“PIPE”) cannot be offered for sale to the public until the issuer complies with certain statutory or contractual
requirements. Such securities traded on inactive markets or valued by reference to similar instruments or where a discount may be applied are
generally categorised in Level 2. However, to the extent that significant inputs used to determine liquidity discounts are unobservable, PIPE may be
categorized in Level 3 of the fair value hierarchy.
Derivative contracts
Equity swaps
Equity swaps may be centrally cleared or traded on the over-the-counter market. The fair value of equity swaps is calculated based on the terms of
the contract and current market data, such as changes in fair value of the reference asset. The fair value of equity swaps is generally categorised in
Level 2 of the fair value hierarchy.
Warrants
Warrants that are listed on major securities exchanges are valued at their last reported sales price as of the valuation date. The fair value of over-the-
counter (“OTC”) warrants is determined using the Black-Scholes option pricing model, a valuation technique that follows the income approach. This
pricing model takes into account the contract terms (including maturity) as well as multiple inputs, including time value, implied volatility, equity prices,
interest rates and currency rates. Warrants are categorised in all levels of the fair value hierarchy.
Contingent value rights
Contingent value rights that are not traded on an organized facility are valued using a market approach or such other analysis and information as the
Group may determine.
82
1. Nature of operations and summary of significant accounting policies (continued)
Fair value – valuation processes
The Group establishes valuation processes and procedures to ensure that the valuation techniques are fair and consistent, and valuation inputs are
supportable. The Group designates the Investment Manager’s Valuation Committee to oversee the entire valuation process of the Group’s
investments. The Valuation Committee comprises various members of the Investment Manager, including those separate from the Group’s portfolio
management and trading functions, and reports to the Board.
The Valuation Committee is responsible for developing the Group’s written valuation processes and procedures, conducting periodic reviews of the
valuation policies, and evaluating the overall fairness and consistent application of the valuation policies.
The Investment Manager’s Valuation Committee meets on a monthly basis or more frequently, as needed, to determine the valuations of the Group’s
Level 3 investments. Valuations determined by the Valuation Committee are required to be supported by market data, third-party pricing sources,
industry-accepted pricing models, counterparty prices or other methods they deem to be appropriate, including the use of internal proprietary
pricing models.
The Group periodically tests its valuations of Level 3 investments by performing back-testing. Back-testing involves the comparison of sales proceeds
of those investments to the most recent fair values reported and, if necessary, uses the findings to recalibrate its valuation procedures.
On a regular basis, the Group engages the services of third-party valuation firms, the Independent Valuers, to perform an independent review of the
valuation of the Group’s Level 3 investments and the Group may adjust its valuations based on the recommendations from the Investment Manager’s
Valuation Committee.
Translation of foreign currency
Assets and liabilities denominated in foreign currencies are translated into United States Dollar amounts at the year end exchange rates. Transactions
denominated in foreign currencies, including purchases and sales of investments, and income and expenses, are translated into United States Dollar
amounts on the transaction date. Adjustments arising from foreign currency transactions are reflected in the consolidated statement of operations.
The Group does not isolate that portion of the results of operations arising from the effect of changes in foreign exchange rates on investments from
fluctuations arising from changes in market prices of investments held. Such fluctuations are included in net realised and change in unrealised gain/
(loss) on securities, derivatives and foreign currency transactions in the consolidated statement of operations.
Reported net realised gain/(loss) from foreign currency transactions arise from sales of foreign currencies; currency gains or losses realised between
the trade and settlement dates on securities transactions; and the difference between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Group’s books and the United States Dollar equivalent of the amounts actually received or paid.
Net change in unrealised gain/(loss) from foreign currency translation of assets and liabilities arises from changes in the fair values of assets and
liabilities, other than investments in securities at the end of the period, resulting from changes in exchange rates.
Investment transactions and related investment income
Investment transactions are accounted for on a trade date basis. Realised gains and losses on investment transactions have been calculated on a
specific identification method.
Dividends are recorded on the ex-dividend date and interest is recognised on the accrual basis.
Withholding taxes on foreign dividends have been provided for in accordance with the Group’s understanding of the applicable country’s rules and
rates.
Offsetting of amounts related to certain contracts
Amounts due from and to brokers are presented on a net basis, by counterparty, to the extent the Group has the legal right to offset the recognised
amounts and intends to settle on a net basis.
The Group has elected not to offset fair value amounts recognised for cash collateral receivables and payables against fair value amounts recognised
for derivative positions executed with the same counterparty under the same master netting arrangement. At 31 December 2023, the Group had
cash collateral receivables of $23,793,429 (31 December 2022: $16,384,706) (see Note 3) with derivative counterparties under the same master
netting arrangement.
Income taxes
The Company and Subsidiary are exempt from taxation in Guernsey and were each charged an annual exemption fee of GBP1,200, which has increased
to GBP1,600 per annum with effect from 1 January 2024. The Group will only be liable to tax in Guernsey in respect of income arising or accruing from
a Guernsey source, other than from a relevant bank deposit. It is not anticipated that such Guernsey source taxable income will arise. The Group is
managed so as not to be resident in the UK for UK tax purposes.
The Group recognises tax benefits of uncertain tax positions only where the position is more likely than not to be sustained assuming examination by a
tax authority based on the technical merits of the position. In evaluating whether a tax position has met the recognition threshold, the Group must
presume the position will be examined by the appropriate taxing authority and that taxing authority has full knowledge of all relevant information. A
tax position meeting the more likely than not recognition threshold is measured to determine the amount of benefit to recognise in the Group’s
consolidated financial statements. Income tax and related interest and penalties would be recognised as a tax expense in the consolidated statement
of operations if the tax position was deemed to meet the more likely than not threshold.
83
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2023
(Expressed in United States Dollars)
1. Nature of operations and summary of significant accounting policies (continued)
Income taxes (continued)
The Investment Manager has analysed the Group’s tax positions and has concluded no liability for unrecognised tax benefits should be recorded
related to uncertain tax positions. Further, management is not aware of any tax positions for which it is reasonably possible the total amounts of
unrecognised tax benefits will significantly change in the next twelve months.
The Company and the Subsidiary each file income tax returns in the US federal jurisdiction and, as applicable, in US state or local jurisdictions, or
non-US jurisdictions. Generally, the Group was subject to income tax examinations by major taxing authorities for each tax period since inception.
Based on its analysis, the Group determined that it had not incurred any liability for unrecognised tax benefits as of 31 December 2023 or 31
December 2022.
Use of estimates
Preparing consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions in determining
the reported amounts of assets and liabilities, including the fair value of investments, and disclosure of contingent assets and liabilities as of the date
of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ
from those estimates.
New accounting pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC Topic 820, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”.
The amendment clarifies that contractual sale restrictions should not be considered when measuring the equity security’s fair value and prohibits an
entity from recognizing a contractual sale restriction as a separate unit of account. The amendments in this ASU are effective for the Group beginning
after 15 December 2024. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available
for issuance. The Group has chosen to early adopt ASU 2022-03 as of 1 January 2023.
At 31 December 2023, the fair value of the equity securities subject to contractual sale restrictions is $30,232,777. In accordance with ASU 2022-03,
the fair value of these securities was not adjusted to reflect the contractual sale restrictions.
84
2. Fair value measurements
The Group’s assets and liabilities recorded at fair value have been categorised based upon a fair value hierarchy as described in the Group’s significant
accounting policies in Note 1.
The following table presents information about the Group’s assets and liabilities measured at fair value as of 31 December 2023:
Level 1 Level 2 Level 3
Investments
measured at net
asset value* Tot al
Assets (at fair value)
Investments in securities
Common stocks 204,773,131 1,000,720 904,339 – 206,678,190
Convertible preferred stocks 1,854,238 2,836,628 73,189,264 – 77,880,130
Investment in private investment companies – – – 41,855,893 41,855,893
American depository receipts 33,213,628 – – – 33,213,628
Convertible notes – – 7,983,390 – 7,983,390
Total investments in securities 239,840,997 3,837,348 82,076,993 41,855,893 367,611,231
Derivative contracts
Equity swaps – 7,475,802 – – 7,475,802
Warrants 5,247 6,743,593 697,472 – 7,446,312
Contingent value rights – – 541,706 – 541,706
Total derivative contracts 5,247 14,219,395 1,239,178 – 15,463,820
239,846,244 18,056,743 83,316,171 41,855,893 383,075,051
Liabilities (at fair value)
Securities sold short
Common stocks 1,146,920 51,001 – – 1,197,921
Total securities sold short 1,146,920 51,001 – – 1,197,921
Derivative contracts
Equity swaps – 8,390,327 – – 8,390,327
Total derivative contracts – 8,390,327 – – 8,390,327
1,146,920 8,441,328 – – 9,588,248
* The Group’s investment in private investment companies that are valued at their net asset value are not categorised within the fair value hierarchy.
85
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2023
(Expressed in United States Dollars)
2. Fair value measurements (continued)
The following table presents information about the Group’s assets and liabilities measured at fair value as of 31 December 2022:
Level 1 Level 2 Level 3
Investments
measured at net
asset value* Tot al
Assets (at fair value)
Investments in securities
Common stocks 225,817,734 534,871 3,364,557 – 229,717,162
Convertible preferred stocks 117,696 – 57,932,949 – 58,050,645
American depository receipts 38,230,091 – – – 38,230,091
Investment in private investment companies – – – 14,074,846 14,074,846
Convertible notes – – 10,052,833 – 10,052,833
Total investments in securities 264,165,521 534,871 71,350,339 14,074,846 350,125,577
Derivative contracts
Equity swaps – 19,086,329 – – 19,086,329
Warrants – 1,904,409 476,911 – 2,381,320
Total derivative contracts – 20,990,738 476,911 21,467,649
264,165,521 21,525,609 71,827,250 14,074,846 371,593,226
Liabilities (at fair value)
Securities sold short
Common stocks 11,810,966 98,829 – – 11,909,795
American depository receipts 528,539 – – – 528,539
Total securities sold short 12,339,505 98,829 – 12,438,334
Derivative contracts
Equity swaps – 8,926,743 – – 8,926,743
Total derivative contracts – 8,926,743 – – 8,926,743
12,339,505 9,025,572 – – 21,365,077
* The Group’s investment in private investment companies that are valued at their net asset value are not categorized within the fair value hierarchy.
Transfers between Levels 2 and 3 generally relate to whether significant relevant observable inputs are available for the fair value measurements in
their entirety. See Note 1 for additional information related to the fair value hierarchy and valuation techniques and inputs. For the year ended 31
December 2023, the Group had net transfers into Level 2 of $161,322 from Level 3 (for the year ended 31 December 2022: $4,555,194) and transfers
into Level 1 of $12,846,527 from Level 3 due to conversion into publicly traded common stocks (for the year ended 31 December 2022: $nil). Transfers
between levels are deemed to occur at year end.
86
2. Fair value measurements (continued)
The following tables summarise the valuation techniques and significant unobservable inputs used for the Group’s investments that are categorised
within Level 3 of the fair value hierarchy as of 31 December 2023 and 31 December 2022:
Fair value at
31 December 2023 Valuation techniques Significant unobservable inputs Range of inputs
Assets (at fair value)
Investments in securities
Convertible preferred stocks 44,732,084 Recent transaction price n/a n/a
19,614,346 Discounted cash flow WACC 13% – 30%
and/or market approach Revenue multiples 2.8x – 4.0x
Market rate of returns (18%) – 10%
8,727,481 Probability-weighted expected
return method (“PWERM”)
WACC
Revenue multiples
Market step-up multiple
12% – 20%
4.0x
0.7x – 1.8x
Market rate of returns (23)% – 10%
Recovery rate 50%
115,353 Liquidation value n/a n/a
Convertible notes 7,566,258 PWERM Discount rate 5% – 7%
Expected volatility 60%
352,904 Discounted cash flow WACC 26%
and/or market approach Revenue multiples
4.0x
Market rate of returns (3%)
64,228 Recent transaction price n/a n/a
Common stocks 798,531 Recent transaction price n/a n/a
105,808 Market approach Revenue multiples 0.5x – 0.6x
Total investments in securities 82,076,993
Derivative contracts
Warrants 697,472 Recent transaction price Expected volatility 38% – 43%
and option pricing model
Contingent value rights 541,706 Recent transaction price n/a n/a
Total derivative contracts 1,239,178
87
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2023
(Expressed in United States Dollars)
2. Fair value measurements (continued)
Fair value at
31 December 2022 Valuation techniques Significant unobservable inputs Range of inputs
Assets (at fair value)
Investments in securities
Convertible preferred stocks 50,023,996 Discounted cash flow WACC 13% – 33%
and/or market approach Revenue multiples 2.8x – 4.0x
Market step-up multiple 0.7x – 1.5x
Market rate of returns -30% – 20%
7,908,953 Price of most recent funding round n/a n/a
Convertible notes 8,772,349 Discounted cash flow WACC 13%
and/or market approach Revenue multiples 4.0x
Market step-up multiple 0.7x – 1.1x
Market rate of returns 0%
1,280,484 PWERM Market rate of returns -30%
Recovery rate 0% – 50%
Common stocks 1,208,299 Discounted cash flow WACC 13%
and/or market approach Revenue multiples 0.2x – 4.0x
Market step-up multiple 0.7x – 1.1x
Market rate of returns -10%
2,156,109 PWERM Probability of business
combination
95%
149 Price of most recent funding round n/a n /a
Total investments in securities 71,350,339
Derivative contracts
Warrants 315,589 Discounted cash flow WACC 33%
Market approach Revenue multiple 4.0x
and/or option pricing model Market rate of returns 10%
Expected volatility 53%
161,322 PWERM Expected volatility 25%
Total derivative contracts 476,911
The significant unobservable inputs used in the fair value measurements of Level 3 common stock, convertible preferred stocks, convertible notes, and
warrants include, but are not limited to, WACC, revenue and/or earnings multiple, market rate of return, and expected volatility. Increases in the WACC
in isolation would result in a lower fair value for the security, and vice versa. Increases in multiples and/or market rate of returns in isolation would
result in a higher fair value of the security, and vice versa. A change in volatility in isolation could result in a higher or lower fair value for the security.
88
2. Fair value measurements (continued)
The below table presents additional information about Level 3 assets and liabilities measured at fair value. Both observable and unobservable inputs
may be used to determine the fair value of positions that the Group has classified within the Level 3 category. As a result, the unrealised gains and
losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable and
unobservable inputs.
Changes in Level 3 assets and liabilities measured at fair value for the year ended 31 December 2023 were as follows:
Balance beginning
1 January 2023
Realised gains/
(losses)
(a)
Change in
Unrealised gains/
(losses)
(a)
Purchases Sales
Transfers into/
(from) Level 3*
Ending balance
31 December 2023
Assets (at fair value)
Investments in securities
Common stocks 3,364,557 – (304,109) – – (2,156,109) 904,339
Convertible preferred stocks 57,932,949 – 6,114,014 7,595,169 – 1,547,132 73,189,264
Convertible notes 10,052,833 – (1,329,981) 11,536,901 – (12,276,363) 7,983,390
Total investments in securities 71,350,339 – 4,479,924 19,132,070 – (12,885,340) 82,076,993
Derivative contracts
Warrants 476,911 – 21,813 321,257 – (122,509) 697,472
Contingent value rights – – 541,706 – – – 541,706
Total derivative contracts 476,911 – 563,519 321,257 – (122,509) 1,239,178
* Includes conversion of convertible bonds into convertible preferred stock and convertible notes.
Changes in Level 3 assets and liabilities measured at fair value for the year ended 31 December 2022 were as follows:
Balance beginning
1 January 2022
Realised gains/
(losses)
(a)
Change in
Unrealised gains/
(losses)
(a)
Purchases Sales
Transfers into/
(from) Level 3
(b)
Ending balance
31 December 2022
Assets (at fair value)
Investments in securities
Convertible preferred stocks 67,177,270 – (17,555,053) 12,142,203 – (3,831,471) 57,932,949
Common stocks 1,943,967 – (664,647) 2,085,237 – – 3,364,557
Convertible notes – – 420,628 8,195,772 – 1,436,433 10,052,833
Convertible bonds 723,723 – – 1,436,433 – (2,160,156) –
Total investments in securities 69,844,960 – (17,799,072) 23,859,645 – (4,555,194) 71,350,339
Derivative contracts
Warrants 134,008 – 76,306 266,597 – – 476,911
Total derivative contracts 134,008 – 76,306 266,597 – – 476,911
(a) Realised and unrealised gains and losses are included in net realised and change in unrealised gain/(loss) on investments, derivatives and foreign currency
transactions in the consolidated statement of operations.
(b) Conversions of preferred stock into common stock.
Changes in Level 3 unrealised gains and losses during the year for assets still held at year end were as follows:
2023 2022
Common stocks 116,949 (664,647)
Convertible notes (919,115) 420,628
Convertible preferred stocks 6,199,338 (13,404,700)
Contingent value rights 541,706 –
Warrants 21,813 76,306
Change in unrealised gains and losses during the year for assets still held at year end 5,960,691 (13,572,413)
89
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2023
(Expressed in United States Dollars)
2. Fair value measurements (continued)
Total realised gains and losses and unrealised gains and losses in the Group’s investment in securities, derivative contracts and securities sold short
are made up of the following gain and loss elements:
2023 2022
Realised gains 127,739,248 47,604,728
Realised losses (60,622,155) (41,995,983)
Net realised gain on securities, derivative contracts and securities sold short 67,117,093 5,608,745
2023 2022
Change in unrealised gains 132,672,225 112,585,347
Change in unrealised losses (111,833,730) (152,339,558)
Net change in unrealised gain/(loss) on securities, derivative contracts and securities sold short 20,838,495 (39,754,211)
As at 31 December 2023 the Group had commitments (subject to completion of certain parameters) to certain investments totalling $59,732,160 (31
December 2022: $2,544,486), which was mainly comprised of a $58,078,670 commitment to Acacia Research Corporation for a stake of Arix and a
$1,107,148 uncalled commitment related to the Group’s investment in 4010 Royalty Fund.
3. Due to/from brokers
Due to/from brokers includes cash balances held with brokers and collateral on derivative transactions. Amounts due from brokers may be restricted
to the extent that they serve as deposits for securities sold short or cash posted as collateral for derivative contracts.
As at 31 December 2023, due from brokers totalled $57,887,214 (31 December 2022: $22,195,456). Included within due from brokers is $34,093,785 (31
December 2022: $5,810,750) which can be used for investment. The Group pledged cash collateral to counterparties to over-the-counter derivative
contracts of $23,793,429 (31 December 2022: $16,384,706) which is included in due from brokers.
In the normal course of business, substantially all of the Group’s securities transactions, money balances, and security positions are transacted with
the Group’s prime brokers and counterparties, Goldman Sachs & Co. LLC, Cowen Financial Products, LLC, UBS AG, Bank of America Merrill Lynch,
Morgan Stanley & Co. LLC, Jefferies & Co. and J.P. Morgan Securities, LLC. The Group is subject to credit risk to the extent any broker with which it
conducts business is unable to fulfil contractual obligations on its behalf. The Group’s management monitors the financial condition of such brokers
and does not anticipate any losses from these counterparties.
4. Derivative contracts
In the normal course of business, the Group utilises derivative contracts in connection with its proprietary trading activities. Investments in derivative
contracts are subject to additional risks that can result in a loss of all or part of an investment. The Group’s derivative activities and exposure to
derivative contracts are classified by the primary underlying risk, equity price risk and foreign currency exchange rate risk. In addition to its primary
underlying risk, the Group is also subject to counterparty risk due to the inability of its counterparties to meet the terms of their contracts.
Warrants
The Group may receive warrants from its portfolio companies upon an investment in the debt or equity of a portfolio company. The warrants provide
the Group with exposure and potential gains upon equity appreciation of the portfolio company’s share price.
The value of a warrant has two components: time value and intrinsic value. A warrant has a limited life and expires on a certain date. As time to the
expiration date of a warrant approaches, the time value of a warrant will decline. In addition, if the stock underlying the warrant declines in price, the
intrinsic value of an “in the money” warrant will decline. Further, if the price of the stock underlying the warrant does not exceed the strike price of the
warrant on the expiration date, the warrant will expire worthless. As a result, there is the potential for the Group to lose its entire investment in a
warrant.
The Group is exposed to counterparty risk from the potential failure of an issuer of warrants to settle its exercised warrants. The maximum risk of
loss from counterparty risk to the Group is the fair value of the contracts and the purchase price of the warrants. The Group considers the effects of
counterparty risk when determining the fair value of its investments in warrants.
Equity swap contracts
The Group is subject to equity price risk in the normal course of pursuing its investment objectives. The Group may enter into equity swap
contracts either to manage its exposure to the market or certain sectors of the market, or to create exposure to certain equities to which it
is otherwise not exposed.
Equity swap contracts involve the exchange by the Group and a counterparty of their respective commitments to pay or receive a net amount based
on the change in the fair value of a particular security or index and a specified notional amount.
90
4. Derivative contracts (continued)
Contingent value rights
The Group may receive contingent value rights during mergers, acquisitions, or divestitures. Contingent value rights are designed to provide the
Group with additional compensation or benefits contingent upon the occurrence of specific future events, such as regulatory approvals, milestones
related to product development or commercialization, or the achievement of certain financial targets. Contingent value rights are subject to the
uncertainty of payout, as their value hinges on the occurrence of specific events. The Group considers the uncertainty when determining the fair
value of its investments in contingent value rights.
Volume of derivative activities
The Group considers the average month-end notional amounts during the year, categorised by primary underlying risk, to be representative of the
volume of its derivative activities during the year ended 31 December 2023:
2023 2022
Long exposure Short exposure Long exposure Short exposure
Notional amounts Notional amounts Notional amounts Notional amounts
Primary underlying risk
Equity price
Equity swaps 64,032,939 56,046,951 48,774,292 56,273,944
Warrants
(a)
3,963,562 – 4,024,470 –
Contingent value rights 541,706 – – –
68,538,207 56,046,951 52,798,762 56,273,944
(a) Notional amounts presented for warrants are based on the fair value of the underlying shares as if the warrants were exercised at each respective month end date.
Impact of derivatives on the consolidated statement of assets and liabilities and consolidated statement of operations
The following tables identify the fair value amounts of derivative instruments included in the consolidated statement of assets and liabilities as
derivative contracts, categorised by primary underlying risk, at 31 December 2023 and 31 December 2022. The following table also identifies the gain
and loss amounts included in the consolidated statement of operations as net realised gain/(loss) on derivative contracts and net change in unrealised
gain/(loss) on derivative contracts, categorised by primary underlying risk, for the year ended 31 December 2023 and 31 December 2022.
2023
Primary underlying risk
Derivative assets
Derivative
liabilities
Realised gain/
(loss)
Change in
unrealised gain/
(loss)
Equity price
Equity swaps 7,475,802 8,390,327 (2,428,614) (11,074,111)
Warrants 7,446,312 – (373) 1,408,458
Contingent value rights 541,706 – – 541,706
15,463,820 8,390,327 (2,428,987) (9,123,947)
2022
Primary underlying risk
Derivative assets
Derivative
liabilities
Realised gain/
(loss)
Change in
unrealised gain/
(loss)
Equity price
Equity swaps 19,086,329 8,926,743 (2,748,269) 5,894,995
Warrants 2,381,320 – – (1,293,427)
21,467,649 8,926,743 (2,748,269) 4,601,568
5. Securities lending agreements
The Group has entered into securities lending agreements with its prime brokers. From time to time, the prime brokers lend securities on the Group’s
behalf. As of 31 December 2023 and 31 December 2022, no securities were loaned and no collateral was received.
91
Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2023
(Expressed in United States Dollars)
6. Offsetting assets and liabilities
The Group is required to disclose the impact of offsetting assets and liabilities represented in the consolidated statement of assets and liabilities
to enable users of the consolidated financial statements to evaluate the effect or potential effect of netting arrangements on its financial position for
recognised assets and liabilities. These recognised assets and liabilities are financial instruments and derivative instruments that are either subject
to an enforceable master netting arrangement or similar agreement or meet the following right of setoff criteria: the amounts owed by the Group to
another party are determinable, the Group has the right to offset the amounts owed with the amounts owed by the other party, the Group intends
to offset and the Group’s right of setoff is enforceable by law.
As of 31 December 2023 and 31 December 2022, the Group held financial instruments and derivative instruments that were eligible for offset in the
consolidated statement of assets and liabilities and are subject to a master netting arrangement. The master netting arrangement allows the
counterparty to net applicable collateral held on behalf of the Group against applicable liabilities or payment obligations of the Group to the
counterparty. These arrangements also allow the counterparty to net any of its applicable liabilities or payment obligations they have to the Group
against any collateral sent to the Group.
As discussed in Note 1, the Group has elected not to offset assets and liabilities in the consolidated statement of assets and liabilities. The following
table presents the potential effect of netting arrangements for asset derivative contracts presented in the consolidated statement of assets and
liabilities:
Description
Gross amounts of
recognised assets
Gross amounts offset
in the consolidated
statement of assets
and liabilities
Gross amounts of
recognised assets
and liabilities
31 December 2023
Gross amounts not offset in the
consolidated statement of
assets and liabilities
Financial
instruments
(a)
Cash collateral
received
(b)
Net amount
Equity swaps
Cowen Financial Products, LLC 6,235,319 – 6,235,319 (286,396) – 5,948,923
Jefferies & Co. 1,058,293 – 1,058,293 (758,677) – 299,616
Morgan Stanley & Co. LLC 129,527 – 129,527 (129,527) – –
Bank of America Merrill Lynch 52,663 – 52,663 (52,663) – –
7,475,802 – 7,475,802 (1,227,263) – 6,248,539
Description
Gross amounts of
recognised assets
Gross amounts offset
in the consolidated
statement of assets
and liabilities
Gross amounts of
recognised assets
and liabilities
31 December 2022
Gross amounts not offset in the
consolidated statement of
assets and liabilities
Net amount
Financial
instruments
(a)
Cash collateral
received
(b)
Equity swaps
Bank of America Merrill Lynch 12,929,367 – 12,929,367 (3,983,939) – 8,945,428
Cowen Financial Products, LLC 3,239,591 – 3,239,591 (1,224,200) – 2,015,391
Morgan Stanley & Co. LLC 2,797,503 – 2,797,503 (2,797,503) – –
Jefferies & Co. 119,868 – 119,868 (119,868) – –
19,086,329 – 19,086,329 (8,125,510) – 10,960,819
(a) Amounts related to master netting agreements (e.g. ISDA), determined by the Group to be legally enforceable in the event of default and if certain other criteria are
met in accordance with applicable offsetting accounting guidance but were not offset due to management’s accounting policy election.
(b) Amounts related to master netting agreements and collateral agreements determined by the Group to be legally enforceable in the event of default, but certain
other criteria are not met in accordance with applicable offsetting accounting guidance. The collateral amounts may exceed the related net amounts of financial
assets and liabilities presented in the consolidated statement of assets and liabilities. If this is the case, the total amount reported is limited to the net amounts of
financial assets and liabilities with that counterparty.
92
6. Offsetting assets and liabilities (continued)
The following tables present the potential effect of netting arrangements for liability derivative contracts presented in the consolidated statement
of assets and liabilities as of 31 December 2023 and audited consolidated statement of assets and liabilities 31 December 2022:
Description
Gross amounts of
recognised
liabilities
Gross amounts offset
in the consolidated
statement of assets
and liabilities
Gross amounts of
recognised
liabilities
31 December 2023
Gross amounts not offset in the
consolidated statement of
assets and liabilities
Net amount
Financial
instruments
(a)
Cash collateral
pledged
(b)
Equity swaps
Bank of America Merrill Lynch 4,382,764 – 4,382,764 (52,663) (4,320,957) 9,144
Morgan Stanley & Co. LLC 2,962,490 – 2,962,490 (129,527) (2,832,963) –
Jefferies & Co. 758,677 – 758,677 (758,677) – –
Cowen Financial Products, LLC 286,396 – 286,396 (286,396) – –
8,390,327 – 8,390,327 (1,227,263) (7,153,920) 9,144
Description
Gross amounts of
recognised
liabilities
Gross amounts offset
in the consolidated
statement of assets
and liabilities
Gross amounts of
recognised
liabilities
31 December 2022
Gross amounts not offset in the
consolidated statement of
assets and liabilities
Net amount
Financial
instruments
(a)
Cash collateral
pledged
(b)
Equity swaps
Bank of America Merrill Lynch 3,983,939 – 3,983,939 (3,983,939) – –
Morgan Stanley & Co. LLC 3,372,143 – 3,372,143 (2,797,503) (574,640) –
Cowen Financial Products, LLC 1,224,200 – 1,224,200 (1,224,200) – –
Jefferies & Co. 336,931 – 336,931 (119,868) (217,063) –
UBS AG 9,530 – 9,530 – (9,530) –
8,926,743 – 8,926,743 (8,125,510) (801,233) –
(a) Amounts related to master netting agreements (e.g. ISDA), determined by the Group to be legally enforceable in the event of default and if certain other criteria
are met in accordance with applicable offsetting accounting guidance but were not offset due to management’s accounting policy election.
(b) Amounts related to master netting agreements and collateral agreements determined by the Group to be legally enforceable in the event of default, but certain
other criteria are not met in accordance with applicable offsetting accounting guidance. The collateral amounts may exceed the related net amounts of financial
assets and liabilities presented in the consolidated statement of assets and liabilities. If this is the case, the total amount reported is limited to the net amounts of
financial assets and liabilities with that counterparty.
7. Securities sold short
The Group is subject to certain inherent risks arising from its investing activities of selling securities short. The ultimate cost to the Group to acquire
these securities may exceed the liability reflected in these consolidated financial statements.
8. Risk factors
Some underlying investments may be deemed to be highly speculative investments and are not intended as a complete investment programme. The
Group is designed only for sophisticated persons who are able to bear the economic risk of the loss of their entire investment in the Group and who
have a limited need for liquidity in their investment. The following risks are applicable to the Group:
Market risk
Certain events particular to each market in which Portfolio Companies conduct operations, as well as general economic and political conditions, may
have a significant negative impact on the operations and profitability of the Group’s investments and/or on the fair value of the Group’s investments.
Such events are beyond the Group’s control, and the likelihood they may occur and the effect on the Group cannot be predicted. The Group intends to
mitigate market risk generally by investing in Medtech and Biotech Companies in various geographies.
Portfolio Company products are subject to regulatory approvals and actions with new drugs, medical devices and procedures being subject to
extensive regulatory scrutiny before approval, and approvals can be revoked.
The market value of the Group’s holdings in public Portfolio Companies could be affected by a number of factors, including, but not limited to: a change
in sentiment in the market regarding the public Portfolio Companies, the market’s appetite for specific asset classes; and the financial or operational
performance of the public Portfolio Companies.
The size of investments in public Portfolio Companies or involvement in management may trigger restrictions on buying or selling securities. Laws and
regulations relating to takeovers and inside information may restrict the ability of the Group to carry out transactions, or there may be delays or
disclosure requirements before transactions can be completed.
Equity prices and returns from investing in equity markets are sensitive to various factors, including but not limited to: expectations of future
dividends and profits; economic growth; exchange rates; interest rates; and inflation.
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Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2023
(Expressed in United States Dollars)
8. Risk factors (continued)
Biotech/healthcare companies
The Portfolio Companies are biotechnology and medical technology companies, which are generally subject to greater governmental regulation than
other industries at both the state and federal levels. Changes in governmental policies may have a material effect on the demand for or costs of
certain products and services.
Any failure by a Portfolio Company to develop new technologies or to accurately evaluate the technical or commercial prospects of new technologies
could result in it failing to achieve a growth in value and this could have a material adverse effect on the Group’s financial condition.
Portfolio Companies may not successfully translate promising scientific theory into a commercially viable business opportunity. Further, the Portfolio
Companies’ therapies in development may fail clinical trials and therefore no longer be viable.
Portfolio Company products are subject to intense competition and there are many factors that will affect whether the new therapies released by
the Portfolio Companies gain market share against competitors and existing therapies.
Portfolio Companies may be newer small and mid-size Medtech and Biotech Companies. These companies may be more volatile and have less
experience and fewer resources than more established companies.
Concentration risk
The Group may not make an investment or a series of investments in a Portfolio Company that result in the Group’s aggregate investment in such
Portfolio Company exceeding 15 per cent of the Group’s gross assets, save for Rocket for which the limit is 25 per cent as stated in the Group’s
Prospectus. Each of these investment restrictions will be calculated as at the time of investment. As such, it is possible that the Group’s portfolio
may be concentrated at any given point in time, potentially with more than 15 per cent of gross assets held in one Portfolio Company as Portfolio
Companies increase or decrease in value following such initial investment. The Group’s portfolio of investments may also lack diversification among
Medtech and Biotech Companies and related investments.
Concentration of credit risk
In the normal course of business, the Group maintains its cash balances in financial institutions, which at times may exceed US federal or UK insured
limits, as applicable. The Group is subject to credit risk to the extent any financial institution with which it conducts business is unable to fulfil
contractual obligations on its behalf. Management monitors the financial condition of such financial institutions and does not anticipate any losses from
these counterparties.
Counterparty risk
The Group invests in equity swaps and takes the risk of non-performance by the other party to the contract. This risk may include credit risk of the
counterparty, the risk of settlement default, and generally, the risk of the inability of counterparties to perform with respect to transactions, whether
due to insolvency, bankruptcy or other causes.
In an effort to mitigate such risks, the Group will attempt to limit its transactions to counterparties which are established, well capitalised and
creditworthy.
Liquidity risk
Liquidity risk is the risk that the Group cannot meet its financial commitments as they fall due. The Group’s unquoted investments may have limited
or no secondary market liquidity so the Investment Manager maintains a sufficient balance of cash and market quoted securities which can be sold if
needed to meet its commitments.
The Group’s investments in quoted securities may also be subject to sale restrictions on listing and when the Investment Manager is subject to close
periods or privy to confidential information by virtue of their active involvement in the management of portfolio companies.
Derivative transactions may not be liquid in all circumstances, such that in volatile markets it may not be possible to close out a position without
incurring a loss. The illiquidity of the derivatives markets may be due to various factors, including congestion, disorderly markets, limitations on
deliverable supplies, the participation of speculators, government regulation and intervention, and technical and operational or system failures.
Foreign exchange risk
The Group will make investments in various jurisdictions in a number of currencies and will be exposed to the risk of currency fluctuations that may
materially adversely affect, amongst other things, the value of the Portfolio Company or the Group’s investment in such Portfolio Company, or any
distributions received from the Portfolio Company. Under its investment policy, the Group does not intend to enter into any securities or financially
engineered products designed to hedge portfolio exposure or mitigate portfolio risk as a core part of its investment strategy.
94
9. Share capital
During the year ended 31 December 2023 the Company did not issue any Ordinary Shares:
2023 2023 2022 2022
Number of
Ordinary Shares
Number of
Treasury Shares
Number of
Ordinary Shares
Number of
Treasury Shares
As at 1 January 212,389,138 - 212,389,138 -
Share buyback (1,753,791) 1,753,791 - -
As at 31 December 210,635,347 1,753,791 212,389,138 -
During the year ended 31 December 2023, the Company bought back 1,753,791 Ordinary Shares at an average price of US$1.19 for a total cost of
US$2,093,411, including transaction costs of $4,178. At the date of approval of these consolidated financial statements, all 1,753,791 of the Ordinary
Shares were held as treasury shares (31 December 2022: nil).
Ordinary Shares carry the right to receive all income of the Company attributable to the Ordinary Shares and to participate in any distribution of
such income made by the Company. Such income shall be divided pari passu among the holders of Ordinary Shares in proportion to the number of
Ordinary Shares held by them.
Ordinary Shares shall carry the right to receive notice of and attend and vote at any general meeting of the Company, and at any such meeting on a
show of hands, every holder of Ordinary Shares present in person (includes present by attorney or by proxy or, in the case of a corporate member, by
duly authorised corporate representative) and entitled to vote shall have one vote, and on a poll, subject to any special voting powers or restrictions,
every holder of Ordinary Shares present in person or by proxy shall be entitled to one vote for each Ordinary Share, or fraction of an Ordinary Share,
held.
On 1 December 2022, the Performance Allocation Share held by RTW Venture Performance LLC was surrendered in exchange for a New Performance
Allocation Share issued by the Subsidiary. The New Performance Allocation Share issued by the Subsidiary has identical terms to the original
Performance Allocation Share issued by the Company. From 1 December 2022, the Performance Allocation Amount has been allocated at the
Subsidiary level, and presented in the Group’s financial statements as part of the Non-Controlling Interest. The sole New Performance Allocation
Share is held by RTW Venture Performance LLC. As at 31 December 2023, there were no Performance Allocation Shares of the Company in issue
(31 December 2022: nil) and one New Performance Allocation Share of the Subsidiary in issue (31 December 2022: one).
New Performance Allocation Shares of the Subsidiary carry the right to receive, and participate in, any dividends or other distributions of the
Subsidiary available for dividend or distribution. New Performance Allocation Shares are not entitled to receive notice of, to attend or to vote at
general meetings of the Company or the Subsidiary.
For all share classes, subject to compliance with the solvency test set out in the Companies Law, the Board may declare and pay such annual or
interim dividends and distributions as appear to be justified by the position of the Group. The Board may, in relation to any dividend or distribution,
direct that the dividend or distribution shall be satisfied wholly or partly by the distribution of assets, and in particular of paid-up shares or reserves
of any nature as approved by the Group.
10. Related party transactions
Management Fee
The Investment Manager receives a monthly management fee, in advance, as of the beginning of each month in an amount equal to 0.104% (1.25% per
annum) of the net assets of the Group (the “Management Fee”). For purposes of determining the Management Fee, private investments will be valued
at the fair value. The Management Fee will be prorated for any period that is less than a full month. The Management Fees charged for the year ended
31 December 2023 amounted to $4,269,757 (year ended 31 December 2022: $3,751,464) of which $nil (31 December 2022: $nil) was outstanding at the
year end.
Performance Allocation
The Performance Allocation Share held by RTW Venture Performance LLC was surrendered in exchange for a New Performance Allocation Share
issued by the Subsidiary. The New Performance Allocation Share issued by the Subsidiary has identical terms to the original Performance Allocation
Share issued by the Company.
In respect of each Performance Allocation Period, the Performance Allocation Amount shall be allocated at the Subsidiary level and disclosed on
the Group’s financial statements within the Non-Controlling Interest, subject to the satisfaction of a hurdle condition.
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Strategic Report Governance Report Financial Statements Additional Information
Consolidated Financial Statements
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December 2023
(Expressed in United States Dollars)
10. Related party transactions (continued)
Performance Allocation (continued)
The Performance Allocation Amount relating to the Performance Allocation Period, which is calculated solely at the Subsidiary, is an amount equal to:
((A-B) x C) x 20 per cent
where:
A is the Adjusted Net Asset Value per Ordinary Share on the Calculation Date, adjusted by:
adding back (i) the total net Distributions (if any) per Ordinary Share (whether paid, or declared but not yet paid) during the Performance
Allocation Period; and (ii) any accrual for the Performance Allocation for the current Performance Allocation Period reflected in the Net Asset
Value per Ordinary Share; and deducting any accretion in the Net Asset Value per Ordinary Share resulting from either the issuance of Ordinary
Shares at a premium or the repurchase or redemption of Ordinary Shares at a discount during the Performance Allocation Period;
B is the Adjusted Net Asset Value per Ordinary Share at the start of the Performance Allocation Period; and
C is the time weighted average number of Ordinary Shares in issue during the Performance Allocation Period.
The Hurdle Amount represents an 8 per cent annualised compounded rate of return in respect of the Adjusted Net Asset Value per Ordinary Share
from the start of the initial Performance Allocation Period through the then current Performance Allocation Period.
The Performance Allocation Share Class can elect to receive the Performance Allocation Amount in Ordinary Shares, cash, or a mixture of the two,
subject to a minimum 50% as Ordinary Shares. The Performance Allocation Share Class entered into a letter agreement dated 21 April 2020,
pursuant to which the Performance Allocation Share Class agreed to defer distributions of Ordinary Shares that would otherwise be distributed to
the Performance Allocation Share Class no later than 30 business days after the publication of the Group’s audited annual consolidated financial
statements. Under that letter agreement, such Ordinary Shares shall be distributed to the Performance Allocation Share Class at such time or times
as determined by the Boards of Directors of the Group.
The Group will increase or decrease the amount owed to the Performance Allocation Share Class based on its investment exposure to the Group’s
performance had such Performance Ordinary Shares been so issued. The Performance Allocation Amount for the year ended 31 December 2023
includes the residual, undistributed Performance Allocation Amounts from prior years that were previously converted into a total of 14,228,208
Notional Ordinary Shares. These Notional Ordinary Shares are subject to market risk alongside the Ordinary Shares and incurred a mark to market
gain of $5,137,836 in 2023 (31 December 2022: mark to market loss of $2,476,036), which is included in Performance Allocation within the consolidated
statement of changes in net assets. There was an allocation of uncrystallized performance allocation from Ordinary Shareholders to the Performance
Allocation Share Class of $2,756,842 related to the Group’s performance in the period (31 December 2022: $nil).
Until the Group makes a distribution of Ordinary Shares to the Performance Allocation Share Class, the Group will have an unsecured discretionary
obligation to make such distribution at such time or times as the Board of Directors of the Group determines. RTW Venture Performance LLC has
agreed to the deferral of the distributions of the Subsidiary’s Ordinary Shares in connection with its own tax planning. The Group does not believe that
the deferral of such distributions to the Performance Allocation Share Class will have any negative effects on holders of the Company’s Ordinary Shares.
RTW Venture Performance LLC, an affiliate of the Investment Manager, is a member of the Performance Allocation Share Class and will therefore
receive a proportion of the Performance Allocation Amount. For the year ended 31 December 2023, the Board did not approve a cash distribution to
the Performance Allocation Share Class (year ended 31 December 2022: $nil). At the year end the Performance Allocation Share Class of the
Subsidiary is reflected within the Non-Controlling Interest balance of $29,739,146 (31 December 2022: $21,844,468).
The Investment Manager is also refunded any research costs incurred on behalf of the Group.
On 6 July 2023, the Group signed a $25,000,000 commitment to 4010 Royalty Fund, a private fund created and managed by RTW Investments, LP.
The Group subsequently funded $23,892,852 of this commitment on 20 July 2023 and had a remaining commitment of $1,107,148 at 31 December
2023. No management or performance fees are charged to the Group at the 4010 Royalty Fund.
One of the Directors of the Group, Stephanie Sirota, is also a partner and the Chief Business Officer of the Investment Manager.
As at 31 December 2023, the number of Ordinary Shares held by each Director was as follows:
2023 2022
Number of
Ordinary Shares
Number of
Ordinary Shares
William Simpson 200,000 200,000
Paul Le Page 128,000 128,000
William Scott 350,000 305,003
Stephanie Sirota 1,010,000 1,010,000
Roderick Wong is a major shareholder and a member of the Investment Manager. Roderick Wong serves on the boards of the following investments:
Rocket, Ji Xing, and Yarrow Biotechnology. As at 31 December 2023, he held 29,693,872 Ordinary Shares in the Group (14.10% of the Ordinary Shares
in issue) (31 December 2022: 29,593,872, 13.93% of the Ordinary Shares in issue).
96
10. Related party transactions (continued)
Performance Allocation (continued)
The total Directors’ fees expense for the year amounted to $177,011 (31 December 2022: $176,722) of which $50,369 was outstanding at 31 December
2023 (31 December 2022: $48,281) and is included within accrued expenses.
All of the Directors of the Company are also directors of the Subsidiary and each has served since the Subsidiary’s incorporation on 23 November 2022.
11. Administrative services
Elysium Fund Management Limited (“EFML”) serves as Administrator to the Group, providing administration, corporate secretarial, corporate
governance and compliance services. Morgan Stanley Fund Services USA LLC (“MSFS”) serves as the Group’s Sub-Administrator.
During the year ended 31 December 2023, EFML and MSFS charged administration fees of $421,468 (including $212,000 (GBP165,000) in respect of
one-off work and compensation for work performed in prior years) and $251,954 respectively (31 December 2022: EFML charged $93,469 and MSFS
charged $218,534), of which $18,465 and $94,250 (31 December 2022: EFML $6,484, MSFS $91,099) were outstanding at 31 December 2023, and were
included within accrued expenses.
12. Financial highlights
Financial highlights for the year ended 31 December 2023 and 31 December 2022 are as follows:
2023 2022
Per Ordinary Share operating performance
Net Asset Value, beginning of year $ 1.54 $ 1.71
Share buybacks - -
Income from investments
Net investment income/(loss) (0.02) (0.02)
Net realised and unrealised gain/(loss) on securities, derivatives and foreign currency transactions 0.42 (0.15)
Income/(loss) attributable to Non-Controlling Interest (0.04) –
Total from investment operations 0.36 (0.17)
Net Asset Value, end of year $1.90 $ 1.54
Total return
Total return before Performance Allocation 24.27 % (10.18)%
Performance Allocation (excluding mark to market) (0.80) % – %
Total return after Performance Allocation 23.47 % (10.18)%
Ratios to average net assets*
Expenses 2.58 % 2.47%
Performance Allocation (including mark to market) 2.28 % (1.44)%
Expenses and Performance Allocation 4.86 % 1.03%
Net investment income/(loss) (1.38) % (1.75)%
NAV total return for the year 23.47 % (10.18)%
* Ratios are not annualised.
Financial highlights are calculated for Ordinary Shares. An individual shareholder’s financial highlights may vary based on the timing of capital share
transactions. Net investment income/loss does not reflect the effects of the Performance Allocation.
13. Subsequent events
On 13 February 2024, the Group completed the acquisition of Arix’s assets. The transaction was announced on 1 November 2023 and was effected
through a scheme of reconstruction and the voluntary winding-up of Arix under section 110 of the Insolvency Act 1986 (see page 09 for further details).
On 1 February 2024, RTW Biotech UK Limited, a wholly owned subsidiary of RTW Biotech Opportunities Operating Limited, was incorporated in the
United Kingdom, and has been used to hold Arix’s assets.
From 31 December 2023 to the date of approval of these consolidated financial statements, the Company bought back 5,550,000 Ordinary Shares at
an average price of $1.33 for a total cost of $7,405,181, including transaction costs of $14,806. At the point of signing these consolidated financial
statements, all 5,550,000 of the Ordinary Shares were held as treasury shares.
These consolidated financial statements were approved by the Board of Directors on 27 March 2024. Subsequent events have been evaluated through this date.
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Strategic Report Governance Report Financial Statements Additional Information
Additional
Information
04  ADDITIONAL INFORMATION
99 General Company Information
100 Glossary
104 Alternative Performance Measures
105 AIFMD Disclosures
106 Schedule of Key Service Providers
98
General Company
Information
General Company Information
Structure Closed-end Investment Fund
Domicile Guernsey
Listing London Stock Exchange, PremiumSegment
Launch date 30 October 2019
Dividend policy To be reinvested
Management fee 1.25%
Performance fee 20% with an 8.0% annualised and compounded-since-inception hurdle
ISIN GG00BKTRRM22
SEDOLs BKTRRM2 and BNNXVW5
Tickers RTW (USD) and RTWG (GBP)
LEI 549300Q7EXQQH6KF7Z84
Website www.rtwfunds.cwom/rtw-biotech-opportunities-ltd
Anticipated
capital toward
early-stage and
de novo company
formations
1/3
(2022: 1/3)
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Strategic Report Governance Report Financial Statements Additional Information
Glossary
Listing of portfolio company abbreviations used throughout this report
Shorthand Company Name Legal Company Name
Abdera Abdera Therapeutics, Inc.
Acelyrin Acelyrin, Inc.
Alcyone Alcyone Therapeutics, Inc.
Allurion Allurion Technologies, Inc.
Ancora Ancora Heart, Inc.
Apogee Apogee Therapeutics, Inc.
Artios Artios Pharma, Inc.
Artiva Artiva Biotherapeutics, Inc.
Athira Athira Pharma, Inc.
Avidity Avidity Biosciences, Inc.
Basking Basking Biosciences, Inc.
Biomea Biomea Fusion, Inc.
C4 Therapeutics C4 Therapeutics, Inc.
Cargo Cargo Therapeutics, Inc.
CinCor CinCor Pharma, Inc.
Encoded Encoded Therapeutics, Inc.
Frequency Frequency Therapeutics, Inc.
GH Research GH Research PLC
HSAC2 Health Sciences Acquisition Corporation 2
Immunocore Immunocore Limited
Iteos iTeos Therapeutics, Inc.
Ji Xing or JIXING Ji Xing Pharmaceuticals Limited
Kyverna Kyverna Therapeutics, Inc.
Landos Landos Biopharma, Inc.
Lenz Lenz Therapeutics
Lycia Lycia Therapeutics, Inc.
Magnolia Magnolida Medical Technologies, Inc.
Milestone Milestone Pharmaceuticals, Inc.
Mineralys Mineralys Therapeutics, LLC
Monte Rosa Monte Rosa Therapeutics, Inc.
Neurogastrx Neurogastrx, Inc.
Nikang Nikang Therapeutics, Inc.
Nuance Nuance Pharma
Numab Numab Therapeutics, Inc.
Orchestra Orchestra BioMed, Inc.
OriCell OriCell Therapeutics (Shangha) Co., Ltd
Prometheus Prometheus Biosciences, Inc.
Prometheus Labs Prometheus Laboratories, Inc.
Pulmonx Pulmonx Corporation
Pyxis Pyxis Oncology, Inc.
Rocket Rocket Pharmaceuticals, Inc.
RTW Royalty 1 RTW Royalty Holdings LLC (royalty deal for Mavacamten)
RTW Royalty 2 RTW Fund 2 (royalty deal for Jelmyto)
RTW Royalty Fund 4010 Royalty Fund, a private fund created and managed by RTW Investments, LP.
InBrace Swift Health, Inc.
Tars us Tarsus, Pharmaceuticals, Inc.
Tenaya Tenaya Therapeutics, Inc.
Third Harmonic Third Harmonic Bio, Inc.
Tourmaline Tourmaline Bio, Inc.
Umoja Umoja Biopharma, Inc.
Ventyx Ventyx Biosciences, Inc.
Visus Visus Therapeutics, Inc.
Yarrow RTW Holdings LLC
100
Defined Terms
“Adjusted Net Asset Value” the NAV adjusted by deducting the unrealised gains and unrealised losses in respect of private Portfolio Companies;
“Administrator” means Elysium Fund Management Limited;
“Admission” means admission of the Ordinary Shares to trading on the Main Market of the London Stock Exchange on 30
October 2019;
“AIC” the Association of Investment Companies;
“AIC Code” the AIC Code of Corporate Governance dated February 2019;
“AIFM” means Alternative Investment Fund Manager;
“AIFMD” the Alternative Investment Fund Managers Directive;
“Annual Report” the Annual Report and audited financial statements;
“Antibody” a large Y-shaped blood protein that can stick to the surface of a virus, bacteria, or receptor on a cell;
“Antibody-Oligonucleotide
Conjugates” or “AOC”
molecules that combine structures of an antibody and an oligo;
“Autoimmune diseases” conditions, where the immune system mistakenly attacks a body tissue;
“Calculation date” 31 December or, if such date is not a business day, the previous business day;
“Cardiovascular disease” conditions affecting heart and vascular system;
“Clinical stage” or “clinical
trial”
a therapy in development goes through a number of clinical trials to ensure its safety and efficacy. The trials in
human subjects range from Phase 1 to Phase 3. All studies done prior to clinical testing in human subjects are
considered preclinical;
“CNS” Central Nervous System
“Companies Law” the Companies (Guernsey) Law, 2008 (as amended);
“the Company”
or “RTW Bio”
RTW Biotech Opportunities Ltd, a company incorporated in Guernsey as a close-ended Investment Company. The
Company has an unlimited life and is registered with the GFSC as a Registered Closed-ended Collective Investment
Scheme. The registered office of the Company is 1st Floor, Royal Chambers, St Julian’s Avenue, St Peter Port,
Guernsey, GY1 3JX;
“Core portfolio” Private companies and public companies that were initially added to the portfolio as private investments;
“Corporate Brokers” Bank of America and Numis;
“Crohn’s Disease” a condition, in which a part(s) of digestive tract is inflamed;
“CRS” Common Reporting Standard;
“Danon Disease” a rare genetic heart condition in children, predominantly boys;
“Directors” or “Board” the Directors of the Company as at the date of this document, or who served during the reporting period, and
“Director” means any one of them;
“DTR” Disclosure Guidance and Transparency Rules of the UK’s FCA;
“EU” or “European Union” the European Union first established by the treaty made at Maastricht on 7 February 1992;
“Fanconi Anaemia” a rare genetic blood condition in young children;
“FATCA” the Foreign Account Tax Compliance Act;
“FCA” the Financial Conduct Authority;
“FDA” the United States Food and Drug Administration;
“FRC” the Financial Reporting Council;
“FTC” the Federal Trade Commission;
“Gene therapy” a biotechnology that uses gene delivery systems to treat or prevent a disease;
“Genetic Medicine” an approach to treat or prevent a disease using gene therapy or RNA medicines;
“GFSC” the Guernsey Financial Services Commission;
“GFSC Code” the GFSC Finance Sector Code of Corporate Governance as amended in June 2021;
“Greater China” Encompasses mainland China, Macau, Hong Kong and Taiwan;
“the Group” the Company and the Subsidiary;
“HCM” or “Hypertrophic
cardiomyopathy”
a cardiovascular disease characterised by an abnormally thick heart muscle;
“Im mTAC®” bi-specific biologic molecules designed to fight cancer or viral infections;
“Independent Valuers” Alvarez & Marsal Valuation Services, LLC and Houlihan Lokey, Inc.;
“Infantile Malignant
Osteopetrosis” or “IMO”
a rare genetic bone disease in young children, manifesting in an increased bone density;
“Investigational New Drug”
or “IND”
the FDA’s investigational New Drug programme is the means by which a pharmaceutical company obtains permission
to start human clinical trials;
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Strategic Report Governance Report Financial Statements Additional Information
Glossary
continued
“Investment Manager” RTW Investments, LP;
“IPEV” the International Private Equity and Venture Capital Valuation Guidelines that set out recommendations, intended
to represent current best practice, on the valuation of private capital investments;
“IPO” an initial public offering;
“IRA” Inflation Reduction Act of 2022;
“IRR” internal rate of return;
“ISDA” International Swaps and Derivatives Association;
“Latest Practicable Date” 31 December 2022, being the latest practicable date for valuing an asset for inclusion in this report;
“Lentiviral vector or “LVV” based gene therapy – a type of viral vector used to deliver a gene;
“Leukocyte adhesion
deficiency” or “LAD-I”
a rare genetic disorder of immunodeficiency in young children;
“LifeSci Companies” companies operating in the life sciences, biopharmaceutical, or medical technology industries;
“Listing Rules” the listing rules made under section 73A of the Financial Services and Markets Act 2000 (as set out in the FCA
Handbook), as amended;
“London Stock Exchange” London Stock Exchange plc;
“LSE” London Stock Exchange’s main market for listed securities;
“MAGE-A4” a protein expressed on certain types of tumours;
“Medtech” medical technology sector within healthcare;
“Menin” a target for the treatment development in oncology;
“Merck” Merck & Co., Inc.;
“MOC” multiple on capital is the ratio of realised and unrealised gains divided by the acquisition cost of an investment;
“Myotonic Dystrophy” a genetic condition that affects muscle function;
“Nasdaq Biotech” or “NBI” a stock market index made up of securities of NASDAQ-listed companies classified according to the Industry
Classification Benchmark as either the Biotechnology or the Pharmaceutical industry;
“Net Asset Value” or “NAV” the value of the assets of the Company less its liabilities, calculated in accordance with the valuation guidelines laid
down by the Board;
“New Performance
Allocation Shares”
performance allocation shares of no-par value in the capital of the Subsidiary;
“NewCo” a company incubated by RTW Investments, LP;
“Notional Ordinary Shares” Performance Ordinary Shares, in which receipt of such shares has been deferred;
“Official List” the official list of the UK Listing Authority;
“Oligonucleotides” or
“Oligos”
short DNA or RNA molecules that have a wide range of applications in genetic testing and research;
“Oncology” a therapeutic area focused on diagnosis, prevention and treatment of cancer;
“Ophthalmic conditions” conditions affecting the eye;
“Ordinary Shares” the Ordinary Shares of the Company;
“Other public portfolio” an invested liquidity pool, selected to match, on a pro-rated basis, the long investments held in the Investment
Manager’s private funds and designed to mitigate the drag of setting aside cash for future deployment into core
positions;
“Performance Allocation
Amount”
an allocation connected with the performance of the Company to be allocated to the Performance Allocation Share
Class Fund in such amounts and as such times as shall be determined by the Board;
“Performance Allocation
Period”
the First Performance Allocation Period and/or a subsequent Performance Allocation Period, as the context so
requires;
“Performance Allocation
Share Class Fund”
a class fund for the Performance Allocation Shares or New Performance Allocation Shares to which the
Performance Allocation will be allocated;
“Performance Allocation
Shares”
performance allocation shares of no-par value in the capital of the Company (prior to the 1 December 2022
reorganisation), or performance allocation shares of no-par value in the capital of the Subsidiary (with effect from
the 1 December 2022 reorganisation);
“Performance Allocation
Shareholder”
the holder of Performance Allocation Shares or New Performance Allocation Shares;
“PFIC” Passive Foreign Investment Company;
“Pilot study” a small-scale study;
“PIPE” Stands for private investment in public equity, when an institutional or an accredited investor buys stock directly
from a public company below market price;
“POI Law” The Protection of Investors (Bailiwick of Guernsey) Law, 2020, as amended;
102
“PRAME” a cancer-testis antigen (CTA) that is highly expressed in a broad range of solid and hematologic malignancies;
“Premium Segment” Premium Segment of the Main Market of the LSE;
“PRIority MEdicines” or
“PRIME”
to be accepted for PRIME, a medicine has to show its potential to benefit patients with unmet medical needs based
on early clinical data;
“Prospectus”
the prospectus of the Company, most recently updated in January 2024 and available on the Company’s website
(www.rtwfunds.com/rtw-biotech-opportunities-ltd/documents/);
“Pulmonary conditions” pathologic conditions that affect lungs;
“Pyruvate Kinase
Deficiency” or “PKD”
a rare genetic disorder affecting red blood cells;
“Radiopharmaceuticals” Pharmaceuticals consisting of a radioactive compound used in radiation therapy;
“Rare disease” a disease that affects a small percentage of the population;
“Registrar” Link Market Services (Guernsey) Limited;
“RMAT” Regenerative Medicine Advanced Therapy, an FDA-granted designation for a drug, designed to expedite development
and review processes for promising pipeline products;
“RNA medicines” a type of biotechnology that uses RNA to treat a disease;
“RTW” RTW Investments, LP, also referred to as the Investment Manager;
“RTWCF” RTW Charitable Foundation;
“Russell 2000
Biotechnology Index”
a stock index of small cap biotechnology and pharmaceutical companies;
“SEC Rule 144” selling restricted and control securities;
“SFS” Specialist Fund Segment of the London Stock Exchange;
“Small molecule” a compound that can regulate a biologic activity;
“Sensorineural hearing
loss”
a type of hearing loss caused by damage to the inner ear;
“SPAC” Special Purpose Acquisition Company;
“Sub-Administrator” Morgan Stanley Fund Services USA LLC;
“the Subsidiary” or “OpCo” RTW Biotech Opportunities Operating Ltd;
“Tachycardia” a heart rhythm disorder;
“TIGIT” a target for a checkpoint antibody development in immune-oncology;
“TL1A” a target for the treatment of inflammation associated with inflammatory bowel disease (IBD);
“Type 1 Diabetes” or “TD1” a type of insulin resistance;
“Total shareholder return” a measure of shareholders’ investment in a company with reference to movements in share price and dividends paid
over time;
“UK AIFMD” refers to a domestic regime of laws regulating the management and marketing of alternative investment funds and
fund managers in the UK, which generally maintains the rules set out in the European Union’s AIFMD as implemented
at the end of the transition period following Brexit;
“UK Code” the UK Corporate Governance Code 2018 published by the Financial Reporting Council in July 2018;
“UK-Guernsey IGA” The UK-Guernsey Intergovernmental Agreement for the Automatic Exchange of Information;
“Ulcerative Colitis” an inflammatory bowel disease that causes sores in the digestive tract;
“US GAAP” US Generally Accepted Accounting Principles;
“Uveal melanoma” a type of eye cancer;
“Valuation Committee” Valuation Committee of the Investment Manager;
“WACC” weighted average cost of capital;
“XBI” the SPDR S&P Biotech ETF;
103
Strategic Report Governance Report Financial Statements Additional Information
APM Definition Purpose Calculation
Available Cash Cash held by the Group’s Bankers,
Prime Brokers and an ISDA
counterparties.
A measure of the Group’s liquidity,
working capital and investment
level.
Cash and cash equivalents, Due from brokers, Receivable
from unsettled trades and other miscellaneous current
assets, less Due to brokers, Payable for unsettled trades
and other miscellaneous current liabilities on the
Statement of Assets & Liabilities.
NAV per Ordinary
Share
The Group’s NAV divided by the
number of Ordinary Shares.
A measure of the value of one
Ordinary Share.
The net assets attributable to Ordinary Shares on the
statement of financial position (US$399.3 million) divided by
the number of Ordinary Shares in issue (210,635,347) as at
the calculation date.
Price per share The Company’s closing share price
on the London Stock Exchange for a
specified date.
A measure of the supply and
demand for the Company’s shares.
Extracted from the official list of the London Stock
Exchange.
NAV Growth The percentage increase/decrease in
the NAV per Ordinary share during
the reporting period.
A key measure of the success of the
Investment Manager’s investment
strategy.
The quotient of the NAV per share at the end of the period
(US$1.90) and the NAV per share at the beginning of the
period (US$1.54) minus one expressed as a percentage.
Share price growth/
Total Shareholder
Return
The percentage increase(decrease)
in the price per share during the
reporting period.
A measure of the return that could
have been obtained by holding a
share over the reporting period.
The quotient of the price per share at the end of the period
(US$1.40) and the price per share at the beginning of the
period (US$1.21) minus 1.00 expressed as a percentage. The
measure excludes transaction costs.
Share Price
Premium (Discount)
The amount by which the ordinary
share price is higher/lower than the
NAV per ordinary share, expressed
as a percentage of the NAV per
ordinary share.
A key measure of supply and
demand for the Company’s shares.
A premium implies excess demand
versus supply and vice versa.
The quotient of the price per share at the end of the period
(US$1.40) and the NAV per share at the end of the period
(US$1.90) minus one expressed as a percentage.
Multiple on Invested
Capital (MOIC or
MOC)
The multiple that measures value
that an investment has generated.
A measure to evaluate performance
of the realised and unrealised
investments.
The ratio between initial capital invested in a portfolio
company and current (as of 31 December 2023) value of the
investment. It is a gross metric and calculation is performed
before fees and incentive.
Extended Internal
Rate of Return
(XIRR)
The percentage or single rate of
return when applied to all
transactions in a portfolio company.
A measure of return which is used
when multiple investments have
been made over time into a portfolio
company.
The rate also expressed as a percentage that calculates the
returns on the total investment made with increments
through a given period (from initial investment date to 31
December 2023).
Ongoing charges
ratio
The recurring costs that the Group
has incurred during the period
excluding performance fees and one
off legal and professional fees
expressed as a percentage of the
Group’s average NAV for the period.
A measure of the minimum gross
profit that the Group needs to
produce to make a positive return
for shareholders.
Calculated in accordance with the AIC methodology detailed
on the web link below:
https://www.theaic.co.uk/sites/default/files/documents/
AICOngoingChargescalculation.pdf
Ongoing Charges
2023
US$
2022
US$
Fees to Investment Manager 4,269,757 3,751,464
Legal and professional fees 749,328 1,008,629
Administration fees
1
673,422 312,003
Research costs 474,511 742,738
Audit fees 341,500 329,557
Directors’ remuneration 177,011 176,722
Other expenses 687,805 357,429
Total expenses 7,373,334 6,678,542
Non-recurring expenses (453,231) (487,786)
Total ongoing expenses 6,920,103 6,190,756
Average NAV 369,419,055 322,418,512
Annualised ongoing charges (using AIC methodology) 1.87% 1.92%
1 The Administration fees include US$212,000 (GBP 165,000) in respect of one-off work and compensation for work performed in prior years (see note 11), which is
included in the non-recurring expenses.
Alternative Performance Measures (unaudited)
104
AIFMD Disclosures (unaudited)
Report on remuneration and quantitative remuneration disclosure
Under the Alternative Investment Fund Managers Regulations (‘UK AIFMD’), we are required to make disclosures relating to remuneration of staff
working for the Investment Manager for the year to 31 December 2023.
Amount of remuneration paid
The Investment Manager paid the following remuneration to staff in respect of the financial year ending on 31 December 2023 in relation to work on
the Group.
2023
US$’000
2022
US$’000
Fixed remuneration 814 771
Variable remuneration 1,332 1,010
Total remuneration 2,146 1,780
Number of beneficiaries 77 76
The amount of the aggregate remuneration paid (or to be paid) by the Investment Manager to its partners which has been attributed to the Group in
respect of the financial year ending on 31 December 2023 was US$77.8 million (2022: US$26.8 million). The amount of the total remuneration paid by
the Investment Manager to members of its staff whose actions have a material impact on the risk profile of the Group which has been attributed to
the Group in respect of financial year ending on 31 December 2023 was US$69.1 million (2022: US$23.6 million).
Leverage
The Group may employ leverage and borrow cash, up to a maximum of 50 per cent of the NAV at the time of incurrence, in accordance with its stated
investment policy. The use of borrowings and leverage has attendant risks and can, in certain circumstances, substantially increase the adverse
impact to which the Group’s investment portfolio may be subject. For the purposes of this disclosure, leverage is any method by which the Group’s
exposure is increased, whether through borrowing of cash or securities, or leverage embedded in foreign exchange forward contracts or by any other
means. AIFMD requires that each leverage ratio be expressed as the ratio between a company’s exposure and its net asset value, and prescribes two
required methodologies, the gross methodology and the commitment methodology (as set out in AIFMD Level 2 Implementation Guidance), for
calculating such exposure. Using the methodologies prescribed under AIFMD, the leverage of the Group is detailed in the table below:
Commitment leverage as at
31 December
Gross leverage as at
31 December
2023 2022 2023 2022
Leverage ratio 115% 134% 100% 139%
Other risk disclosures
The risk disclosures relating to risk framework and risk profile of the Group are set out in note 8 to the Financial Statements on pages 93 to 94 and
the principal risks and uncertainties on pages 34 to 36.
Pre-investment disclosures
AIFMD requires certain information to be made available to investors in an Alternative Investment Fund (‘AIF’) before they invest and requires that
material changes to this information be disclosed in the Annual Report of the AIF. There have been no material changes (other than those reflected in
these financial statements) to this information requiring disclosure. .
105
Strategic Report Governance Report Financial Statements Additional Information
Board of Directors
William Simpson (Chair)
Paul Le Page (Chair of Audit Committee)
William Scott
Stephanie Sirota
Investment Manager and AIFM
RTW Investments, LP
40 10th Avenue
Floor 7
New York
NY 10014
United States of America
Registered office
1st Floor, Royal Chambers
St Julian’s Avenue
St Peter Port
Guernsey
GY1 3JX
Administrator and Company Secretary
Elysium Fund Management Limited
1st Floor, Royal Chambers
St Julian’s Avenue
St Peter Port
Guernsey
GY1 3JX
Sub-Administrator
Morgan Stanley Fund Services USA LLC
2000 Westchester Avenue, 1st Floor
Purchase
NY 10577
United States of America
Registrar
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey
GY2 4LH
Independent Valuer
Alvarez & Marsal Valuation Services LLC
600 Madison Avenue
8th Floor
New York
NY 10022
United States of America
Houlihan Lokey, Inc.
245 Park Avenue, 20th Floor
New York
NY10167
United States of America
Guernsey Advocates to the Company
Carey Olsen (Guernsey) LLP
Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
UK Legal Advisers to the Company
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London
EC2A 2EG
Corporate Brokers and Financial Advisers
BofA Securities*
2 King Edward Street
London
EC1A 1HQ
Numis Securities*
45 Gresham Street
London
EC2V 7BF
Public Relations
Buchanan
107 Cheapside
London
EC2V 6DN
Distribution Partner
Cadarn Capital*
c/o WeWork
1 Fore Street Avenue
London
EC2Y 9DT
Independent Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
Principal Bankers
Barclays Bank PLC, Guernsey Branch
Le Marchant House
Le Truchot
St Peter Port
Guernsey
GY1 3BE
Identifiers:
ISIN: GG00BKTRRM22
SEDOL: BKTRRM2 / BNNXVW5
Ticker: RTW / RTWG
LEI: 549300Q7EXQQH6KF7Z84
www.rtwfunds.com/rtw-biotech-opportunities-ltd/
* On 5 April 2023, Numis Securities was appointed as a
corporate broker and financial adviser to the Group,
and on 17 April 2023, Cadarn Capital was appointed as
distribution partner.
Schedule of Key Service Providers
106
rtwfunds.com
Find more information at:
rtwbio.com
biotechopportunities@rtwfunds.com
RTW Investments, LP
40 10th Avenue, Floor 7
New York, NY 10014
(646) 597-6980
RTW Biotech Opportunities Ltd
1st Floor, Royal Chambers,
St Peter Port, Guernsey, GY1 3JX
United Kingdom
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